CompaniesLowe's brings legal action against Woolworths over DIY exit – Financial Times

August 29, 2016 Facebook Twitter LinkedIn Google+ Uncategorized

Woolworths’ exit from its disastrous foray into home improvement has been complicated by last-minute legal action from US retailer Lowe’s Companies, its joint venture partner in the project.

The Australian supermarket giant last week finally detailed how it planned to unwind its failed attempt to crack the domestic DIY market, with a three-way deal that was supposed to bring in gross proceeds of A$1.5bn.

Woolworths formed a 66-33 alliance, known as Hydrox, with Lowe’s in 2011, establishing Masters Home Improvement as a potential competitor to Bunnings, the dominant player in Australian DIY owned by rival Wesfarmers.

But Lowe’s today launched action against Woolworths in Australia’s federal court, saying in a statement the supermarket operator “conducted the affairs of Hydrox in a manner oppressive and unfairly prejudicial to Lowe’s, including by wrongfully and in bad faith seeking to terminate its joint venture agreement and by seeking to exclude Lowe’s from the management of Hydrox.”

Lowe’s is in dispute with Woolworths over its one-third stake in the A$3.3bn JV, and the largest part of Woolworths’ three-way deal – the sale of Masters properties and sites to a consortium of domestic buyers – is subject to approval from the American company.

Woolies said in a statement to the ASX this afternoon it “became aware of an ex parte application filed by Lowe’s in relation to the home improvement joint venture company” but is “yet to be served with documents relating to this application.”

The other two parts of the deal – the sale of Home Timber and Hardware business and clearance of Masters inventory – are proceeding as announced, Woolworths said.

Woolworths shares closed 0.8 per cent lower today, matching the decline for the broader S&P/ASX 200 benchmark.