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Break-up merchants eye struggling DIY chain Focus

Focus DIY store

DIY chain’s owner appoints adviser as it considers options for troubled retailer.

Restructuring firms are circling Focus with a view to breaking up the chain, a move which would prompt the long-expected consolidation in the DIY sector.

Focus owner Cerberus is taking advice from bank Lazard as it considers options for the debt-laden retailer. Firms including GA Asset Advisors and Hilco are said to be waiting in the wings if Cerberus pursues a sale of Focus, the fourth biggest player in a declining DIY market.

Some industry observers believe there is no longer room for four big DIY players. Wickes managing director Jeremy Bird has previously said: “There isn’t room for Wickes, Homebase, B&Q and Focus in their present form.”

A source close to Focus said that Cerberus would need to inject close to £40m into the retailer to fund the roll out of the Genesis store format that chairman Bill Grimsey believes will drive the turnaround.

The source added that a sale would not necessarily happen because Cerberus had held similar discussions with advisers about options for Focus several times in the past.

Sources close to Cerberus said the private equity firm “remains highly supportive of Focus” but that it makes sense to “sound the market out”.

But if a buyer takes control of Focus in order to break it up it is thought B&Q would be interested in about 60 of Focus’s 178 shops, which would not raise competition concerns. Homebase and Wickes are also likely to consider taking stores.

Gordon Brothers recently conducted a stock appraisal at Focus, in order to value the stock “should it come to a sale process” according to one source, who believed that Hilco, which owns Habitat and Allied Carpets, has “put its consultants on standby”.

Focus avoided insolvency last year when it agreed a CVA allowing it to shed 38 non-trading stores and achieve a refinancing.

It is unclear when Cerberus, which bought Focus for £1 three years ago, will make a decision but one source said any sale is not likely to go through until after Christmas.

Seymour Pierce analyst Freddie George said: “We expect Lazard will look to sell the business, no easy task in view of the weak outlook for DIY.” He added, however, that Focus management had “come up with a credible refit programme”, citing its Genesis and convenience formats.

Cerberus, Focus, GA and Hilco declined to or were unavailable to comment.

Source : Insight DIY Team

05 November 2010

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