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Focus to sell off stores to raise funds

The private equity owner of Focus is sounding out other retailers about acquiring some of the DIY chain's shops, as it seeks an injection of funds to roll out its new store format.

Cerberus – which bought Focus for a £1 in 2007 – has hired investment bankers at Lazard to review options for the UK's fourth-biggest DIY chain. Focus has now invited expressions of interest in a number of its 180 shops, although this is just one of a number of options being considered.

The situation has come to a head because the management team of Focus believe that they need an additional £40m to turn around the business which narrowly avoided collapse by implementing an insolvency procedure last year and made a loss of £11.7m for the year to 21 February 2010. It is thought that Cerberus, which owns debt and equity in Focus amounting to £230m, would ideally like to tie up the sale of some stores by the end of the month.

However, multiple sources have questioned the level of demand there is for the stores. They cited the fact that only 15 shops have planning consent for food, which means any purchases by the big grocers, such as Tesco, Asda and Morrisons would be limited. It is believed that Focus's big three rivals, B&Q, Homebase and Wickes, are monitoring the situation, but it is unclear if any have become engaged with the process.

In particular, a move by the market leader B&Q, which declined to comment yesterday, would attract the attention of the competition authorities, if it made a play for a substantial number of the Focus stores.

Lloyds Banking Group, which provides Focus with some of its £50m working capital facility, has lined up the accountancy firm Ernst & Young to run an independent business review of the 180-store DIY retailer.

Source : James Thompson - The Independent

17 November 2010
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