Masters to shut as Woolworths exits

Masters has come to an ignominious end, with all stores closing as Woolworths quits home improvement.

Masters will cease trading at all stores by December 11.

The disastrous push into hardware by Woolworths (WOW) which began six years ago with the opening of its first Masters store in Melbourne will come to an ignominious end on December 11, after the retailer decided to sell up the loss-making chain for $1.5 billion.

Properties sold off, hardware inventory sold to vulture funds, the Masters business will be picked apart asset by asset and stripped for as much value as possible after costing Woolworths more than $3 billion in losses and impairments.

Woolworths announced this afternoon said it had signed three separate contracts to facilitate its exit from its Masters business and will work hard to find thousands of new jobs for current Masters employees within the Woolworths group, or will pay full redundancies where suitable roles cannot be found.

Woolworths chief legal officer Richard Dammery told The Australian this afternoon the company was obviously disappointed that the Masters retail chain – launched with huge fanfare and promise in 2011 – would now close before Christmas.

“I think its fair to say we would like this business to have succeeded, but having made the decision to exit the business, we are pleased we have been able to bring the closure process to a conclusion where our team can have certainty about what is going on and it will be done in an orderly way,’’ Mr Dammery said.

He declined to comment on the dragged-out negotiations with Woolworths’ joint venture partner in Masters -- US hardware giant Lowe’s which owns one third of Masters -- over the buy back of its one third stake. The parties are yet to agree on a sale price, Mr Dammery confirmed.

Under today’s deal, Metcash will acquire Home Timber & Hardware Group for a headline purchase price of $165 million, with the business continuing to trade. Another company, GA Australia has provided an underwritten recovery for the value of the Masters inventory and has been appointed to manage the sell-down of Masters inventory.

The underwritten recovery is subject to certain adjustments and is estimated to deliver gross proceeds of approximately $500 million.

A consortium of wealthy families and private investors including Aurrum Group, Spotlight Group and Chemist Warehouse will buy Masters properties through acquistion of 100 per cent of the shares in Hydrox – the JV vehicle between Woolworths and Lowe’s that owns the hardware division.

The transaction will include 40 Masters freehold trading sites, 21 Masters freehold development sites and 21 Masters leasehold sites. Home Consortium plans to repurpose the former Masters sites into multi-tenant large format centres.

Woolworths will acquire three Masters freehold sites and take assignment of 12 leases to facilitate a complete exit of Hydrox.

“When I was appointed CEO in February, I said exiting the Home Improvement business was a top priority,” Woolworths CEO Brad Banducci said. “Today’s announcement delivers on that commitment.

“These agreements are the result of an intensive seven month process of reviewing all possible options for exit and extensive negiotations. This decision means management can focus on driving the momentum in our core businesses.”

Masters was launched by former Woolworths boss Michael Luscombe, with plans to roll out as many as 150 stores nationwide and take on market leader Bunnings. The Masters chain never made a profit and triggered more than $3 billion in writedowns and impairments for Woolworths.