MFI sells its stores for £1

By This Is Money
Updated: 04:08 EDT, 22 September 2006

Struggling furniture chain MFI today agreed to sell its loss-making retail arm for just £1.

The company struck a deal to offload its 200 stores to private equity firm Merchant Equity Partners for the nominal fee.

MFI will also pay Merchant £74m between now and April 2008 to invest in the stores, which its manufacturing arm will continue to supply.

It will change the name of the rest of the business, which also includes Howden Joinery, to Galiform.

MFI said its manufacturing business will continue to supply the stores in the short term but will then exclusively build kitchens and bedrooms for Howden Joinery, which has 362 outlets around the UK.

Following the sale, which still requires shareholder approval, it plans to take the number of Howden Joinery sites to more than 500, with 60 set to open next year.

'Howden's growth in the past two years has been restricted by the issues faced by the retail business,' it said.

'The proposed disposal of retail will provide management with the opportunity to focus on accelerating Howden's roll-out plan.'

MFI will hold an extraordinary general meeting next month for its shareholders to vote on the sale and the proposed name change.

The retail business has struggled from supply chain problems and made operating losses of £85.1m last year.

The problems saw MFI shares plummet from 143p in February last year to as low as 65.25p in November, although they stood at 87.5p when the deal was agreed early today.

MFI began the auction of its stores in May after revealing it had received a number of approaches for the business, which has suffered from soaring costs.

On top of the £74m invested by MFI, Merchant is set to plough ££102m into the company.