The deal, for a nominal sum thought to be £1, will see Wesfarmers book a loss of up to £230 million and see the firm exit the UK after picking up the DIY chain for £340 million in 2016.
It is unclear at this stage if Hilco, which bills itself as a retail restructuring specialist and also owns HMV, will embark on a store closure programme.
Homebase has 250 UK stores and employs around 12,000 people.
Under the terms of the deal, Hilco will acquire all Homebase assets including the brand, its store network, freehold property, property leases and stock.
A total of 24 stores that were trading as Bunnings, Wesfarmers’ brand, will convert back to the Homebase fascia.
Wesfarmers managing director Rob Scott said: “A divestment under the agreed terms is in the best interests of Wesfarmers’ shareholders and will support the ongoing reset and repositioning of the Homebase business.
“While the review confirmed the business is capable of returning to profitability over time, further capital investment is necessary to support the turnaround.
“The investment has been disappointing, with the problems arising from poor execution post-acquisition being compounded by a deterioration in the macro environment and retail sector in the UK.”
Wesfarmers will also participate in a “value share mechanism” whereby it is entitled to 20% of any future sale of the business.
Retail experts have criticised Wesfarmers for failing to judge the UK market correctly after buying Homebase from Home Retail Group two years ago.
Richard Lim, of Retail Economics, said: “The acquisition of Homebase has been an unbelievable disaster for Wesfarmers.
“Their attempts to disrupt the UK DIY market have failed after a series of woeful management decisions, clumsy execution and a misguided perception of the UK market.
“There’s no doubt that the timing has been ill-fated as the sector faces incredibly tough headwinds.
“Against this backdrop, the business is bleeding cash and the owners have decided enough is enough. Unfortunately, the restructuring will almost inevitably lead to store closures and more job losses on the high street.”
Homebase boss Damian McGloughlin said the agreement with Hilco “marks an exciting new chapter” for the retailer.