MFI sells stores in £1 dealFurniture chain to sell loss-making retail arm
22 September 2006
Furniture chain MFI has today agreed to sell its loss-making retail arm to a private equity group for £1.
After months of speculation the company struck a deal to offload its 200 stores to Merchant Equity Partners.
The retail business has seen operating profits tumble from £71.2 million in 2003 to losses of £49 million last year.
MFI, which also includes Howden Joinery, will change the name of the rest of the business to Galiform.
It said its manufacturing business will continue to supply the 200 stores in the short term but will then exclusively build kitchens and bedrooms for Howden Joinery, which has 362 outlets around the UK.
It plans to take the number of Howden Joinery sites to more than 500, with 60 set to open next year.
It said: 'Howden's growth in the past two years has been restricted by the issues faced by the retail business.
'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.
If the deal goes through MFI will pay Merchant £74 million between now and April 2008 to invest in the stores, while Merchant is set to plough £102 million into the company.
The company made its name selling 'flat pack' kitchens and bedrooms but has come under pressure in recent years from growing demand for custom-built fittings.
In response, MFI set up Howden Joinery, which principally supplies small builders fitting kitchens and bedrooms for customers.
Sales at Howden Joinery have grown to more than £600 million.
In 2005 Which? carried out an investigation into the sales practices MFI used to mislead customers into thinking they had snapped up a bargain.