Days after the collapse of Dick Smith Woolworths sources have said that they plan to kill off their loss making Masters chain, a move that is set to hit several big suppliers.
According to sources Woolworths who originally owned Dick Smith has bought out their Master joint venture partner Lowe’s Companies Inc for an as-yet-undisclosed price.
Investors welcomed to the news, sending Woolworths shares as much as 7.5 per cent higher at $24.36 just before 10.40am (AEDT).
The decision to close or sell Masters also puts at risk more than 7000 jobs across the chain’s network of stores, with many of those jobs part time and casual positions.
Masters has 59 stores in Australia, with its biggest presence in Melbourne and Sydney metro areas.
The news comes as Wesfarmers expects to complete the $705 million acquisition of UK home improvement chain Homebase in the first quarter of 201.
The deal comes after Wesfarmers said on January 14 that it had made a provisional bid for the chain.
The conglomerate has said plans to roll out its Bunnings hardware brand to the UK within five years.
Homebase reported revenue of $3.1 billion for the 12 months ended August 29 and has 265 stores.
Masters chain which has racked up more than $600 million in losses since it started in 2011 and has sucked in more than $3 billion in investment from its partners will close following a review of the business by Woolworths chairman Gordon Cairns.
Woolworths chairman Gordon Cairns said on Monday that Australia’s largest retailer would sell or wind up the home improvement business, which has lost more than $600 million over the last four years.
“We have determined we cannot continue to sustain ongoing losses from this business,” he said.
The decision follows the completion of a strategic review of the home improvement business, which includes Masters and Home Timber and Hardware, and Lowe’s move to exercise its put option.
“Our recent review of operating performance indicates it will take many years for Masters to become profitable,” said Mr Cairns.
“We have determined we cannot continue to sustain ongoing losses from this business,” he said.
“As a result of our engagement with Lowe’s, it has advised us that it intends to exercise the put option which is available to it under the joint venture agreement. The agreement requires this to happen before Woolworths may exercise its call option.”
“Following the exercise of our call option, we intend to pursue an orderly prospective sale or wind -up of the business,” he said.
This would enable full ownership of the business by Woolworths in a shorter timeframe and give the retailer access to the widest range of exit options, Mr Cairns said.