Retail giant Woolworths is a step closer to putting its disastrous foray into hardware behind it.
In a long-awaited ruling, Woolworths’ joint venture partner, the US hardware giant Lowe’s, has been ordered to sell its shares in the joint venture behind hardware chain Masters for an amount yet to be determined.
The share sale to Woolworths will enable Woolworths to then sell the business to a consortium that includes some of Australia’s richest families.
Woolworths and Lowe’s have been squabbling over the value of the latter’s 33 per cent stake in the joint venture behind Masters. Woolworths said it was worth nothing; Lowe’s said it was worth more than $600 million.
The two companies had poured poured billions into launching hardware chain Masters in Australia, to compete with No.1 chain Bunnings. Woolworths pulled the plug on the business in early 2016 after years of losses.
In August last year it announced that Home Consortium – which includes families behind retailers Chemist Warehouse and Spotlight – would buy 40 Masters freehold sites, 21 Masters freehold development sites and 21 Masters leasehold sites.
In addition, it said it would sell inventory for about $500 million and sell the Home Timber and Hardware Group business for $165 million to the listed wholesaler Metcash.
Combined, Woolworths said it would reap $1.5 billion in gross proceeds from the three deals, but only $500 million after costs and prior to shareholder payments.
Woolworths on Friday announced a ruling that Lowe’s was required to sell its 33 per cent stake in joint venture vehicle Hydrox, for a value determined by a third-party independent expert.
“As a consequence of today’s award, Woolworths will be able to conclude the proposed transaction with Home Consortium without the consent of Lowe’s, once the final valuation and share transfer processes have taken place,” it said.
It’s unclear how much money Woolworths will net after paying out Lowe’s for its shares, and then selling the 82 blocks to the Home Consortium.
The Consortium will buy 61 Masters properties and 21 development sites, and then lease them to the likes of retailers Chemist Warehouse, Spotlight and Masters’ one-time rival Bunnings.
Industry insiders suggest there have been delays that have held up Bunnings’ plans to move into those former Masters sites.
Questions remain about how Woolworths would spend a windfall from the proceeds.