Duke Street Capital, a European mid-market firm, has bought The Original Factory Shop, a UK value retailer, for £68.5 million ($139.8 million; €95.2 million), from Barclays Private Equity in a secondary deal.
Barclays Private Equity invested £18.42 million in the management buyout of the business in November 2004.
The Original Factory Shop has 84 outlets across the UK selling a range of discounted merchandise. Much of what is sold is either branded or was originally made for other high street stores and supermarkets.
Tim Lebus, a partner at Duke Street Capital, said: “They have opened 13 stores to date this year. Our plan is to back an aggressive roll-out of the concept into new locations.”
He said the business was attractive because the value proposition would be increasingly appealing to consumers wary of economic uncertainty and also because the stores tended to be in locations, which other retailers would balk at. “It is below the sight line of most of the competition. There are loads of places that do not have their own store.”
He said the deal had a “sensible” amount of leverage. “All the banks are being more careful. We are comfortable with the amount of leverage. It is a cash generative business and new stores will be paid for from cashflow.”
Duke Street has successfully invested in several businesses in the retail and consumer sectors, most recently having acquired Sandpiper CI, formerly CI Traders, the largest retailer in the Channel Islands, and Oasis Healthcare, one of the leading chains of dentists in the UK.
The firm was advised by McQueen, SJ Berwin, Javelin Group and PwC Transaction Services. The vendor was advised by KPMG Corporate Finance and Addleshaw Goddard. Barclays Leveraged Finance and Kaupthing Singer & Friedlander are providing the debt facilities for the acquisition.