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Woolworths Intends to Wind-up Masters

Woolworths Intends to Wind-up Masters
Jan 18, 2016 By Imran Valibhoy Tags: WOW

Woolworths Limited (ASX:WOW) announced that it aims to sell its Home Improvements department which consists of Masters Home Improvement and Home Timber and Hardware after it exercises call options.

The Home Improvements department is operated by Hydrox Holdings Ltd, held by WDR Delware Corporation, which is a subsidiary of Lowe’s Company Inc. Woolworths intends to exercise its call options over the 33.3% interest in Hydrox following Low’s notice to exercise its put option under the joint venture agreement. 

Mr. Gordon Cairns, Chairman of Woolworths, explained the rationale behind the strategy: “Upon being appointed as Chairman, one of our top priorities was to determine the future of the Home Improvement joint venture. In keeping with the spirit of the joint venture we have actively been engaging with our partner, Lowe’s, on this issue.”

Woolworths recently completed a review of its operating performance which indicated that it will take many years for the company to turn Masters, which has lost more than $600 million over the past four years, into a profitable business. The Chairman added that the company cannot continue to sustain ongoing losses from this business.

As a result of Woolworth’s engagement with Lowe’s, the latter advised 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.

The Chairman also mentioned that the company will pursue an orderly prospective sale or wind-up of the business after it completes the call option. He noted that the put and call options process will take at least two months to complete.

Woolworths has made provision for the put options in the carrying value of the business at the end of FY15. The company is currently undertaking the carrying value of its 66.7% interest in Hydrox which will be determined in accordance with applicable accounting standards.

Investors were pleased with the announcement, as WOW as at 1:54 PM (AEDT), jumped 4.5% upon opening.

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Imran Valibhoy Author: Imran Valibhoy Jan 18, 2016

Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.

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