Woolworths and its US joint venture partner Lowe's are expected to appoint independent experts this week to value the loss-making Masters chain after failing to agree on price.
Woolworths and Lowe's had until Monday to agree on the price that Woolworths would pay Lowe's for its 33.3 per cent stake in their home improvement venture in after the US retailer exercised its put option last week, prompting Woolworths to pull the plug on its six-year foray into home improvement.
The venture featured both Masters and the profitable Danks/Home Timber and Hardware business. The pair have failed to reach agreement on the value of the stake within the five business days set out in the put option process and must now obtain independent expert valuations within 15 business days.
If they still fail to agree on a price after a further five days of negotiations, a third independent expert will be called to adjudicate, based on the first two valuations.
Analysts said the lack of agreement reflected the high stakes involved, with Woolworths keen to pay as as little as possible to buy out Lowe's and Lowe's keen to extract some value from its stake after investing more than $US900 million ($1.3 billion) into the venture over the past six years.
"Our view is there will be three independent expert reports," one analyst said.
"Given what is on the line I don't think either Woolworths or Lowe's would be impartial. Lowe's thinks it's worth a lot, Woolworths thinks it's worth very little. Given the quantum of value that's available, it has to go to an independent expert."
Lowe's put option is in Woolworths' books as an $886 million liability, but analysts believe it could be worth between $180 million and $800 million.
Once Woolworths gains full control of the venture, it plans to look for buyers for the Masters big-box chain and the Danks/Home Timber & Hardware, or wind up the business.
Woolworths and Lowe's have invested more than $3.4 billion in home improvement over the past six years and expected the business to break even by 2016.
But Masters has racked up losses of more than $600 million, including $245 million in 2015, and failed to meet any of its sales, earnings and return targets.
Chairman Gordon Cairns drew a line in the sand last week, saying Woolworths no longer had the appetite to sustain further losses.
The Australian Competition and Consumer Commission has indicated it would like to see Masters stores sold to buyers other than Bunnings, such as a new entrant, Metcash's Mitre 10 or independent retailers.
A Woolworths spokesperson declined to comment on prospective buyers or to say whether Woolworths had received approaches since announcing the sale or wind-up of Masters last week.
"Our guiding principle is that we will be seeking the best outcome for shareholders," the spokesperson said.
Woolworths is now reviewing the carrying value of the venture, which is in its accounts at $2.8 billion.
Analysts believe Woolworths will have to book a non-cash impairment charge of at least $1 billion and as much as $2.7 billion, but could realise between $240 million and $1 billion from selling the assets.