Masters sale to begin despite Woolworths-Lowe’s row

Supermarket giant Woolworths will fire the starting gun on the sale of its failing hardware chain, Masters, this week despite an ongoing dispute about its valuation between the company and joint venture partner, Lowe’s.

Advisers to the auction, Citi, plan to distribute an information memorandum on the home improvement division, which include Masters and the smaller, but profitable DIY unit, Home Timberware & Hardware, as Woolworths attempts to draw a line under its disastrous foray in to the sector.

However the long-running debate about the business’s worth may slow down the company’s exit amid concerns among some bidders the negotiations could morph into a protracted legal battle. According to sources close to the process, a number of prospective suitors remain reluctant to sign a confidentiality agreement, which enables them access to due diligence material, until Woolworths and US retailer Lowe’s reach an agreement on the valuation of Masters.

As revealed by The Australian earlier this month, the two companies recently initiated a fresh round of talks based on a new valuation figure after an earlier set of discussions collapsed.

These latest negotiations are due to conclude at the end of April.

Against this fraught backdrop Woolworths is pressing ahead with the Masters sale, which has been codenamed Project Miami.

Theories abound about the final structure of the exit. Yet as The Australian reported recently, separate flyer documents to the cash-churning Masters and HTH, indicate the two businesses will be offloaded separately.

In this scenario, the Masters property portfolio of 63 stores is expected to draw bids from a broad range of suitors including private equity giant Blackstone, Charter Hall Group and Abacus, which is led by the real estate veteran, Frank Wolf.

Arch rival Bunnings and US giant Costco have already expressed interest in securing some of the sites, which span six different states.

Masters competitor Mitre 10 is widely expected to bid for HTH.

However it its understood Woolworths favours rolling the Masters operational business into the smaller DIY chain, which manages a retail chain and wholesale division.

The supermarket’s efforts to exit its home improvement chain come as Woolworths continues to lose ground against Coles, deepening fears among investors the company’s efforts to right the ship may take longer than anticipated.