European private equity firm CVC Capital Partners has agreed to pay £427m to acquire UK car and bike accessories retailer Halfords from Boots, the chemist.
The deal takes CVC’s deal activity above the E1bn mark for the past week, following the E577m acquisition of nearly 5000km of high voltage power lines, acquired from Spanish energy firm Iberdrola on Monday.
The £427m price tag, of which £17m will be deferred pending performance targets, is slightly below Boots' original asking price of £450m.
The deal is CVC’s second foray into the retail sector this year. In May, the firm paid E394m for six Dutch retailers from Vendex KBB, the Dutch non-food retailer. CVC is also thought to be close to acquiring Spanish state-owned passenger ferry business Trasmediterranea and UK auto repair chain Kwik-Fit, with both purchases likely to be multiple hundred million pound deals.
Boots announced in April that it planned to divest the Halfords business, which comprises 400 stores through either demerger or sale. The downturn in the public markets led the company to seek an outright sale of the business, which achieved £54m on turnover of £529m in the year to March 2002.
Jonathan Feuer, managing director of CVC said the acquisition was a good opportunity for CVC to acquire a ‘strong retail business with considerable national coverage’. “We believe that through improved operational efficiencies and expansion, there is considerable scope for growth and further development of the Halfords business.”
Feuer said he believed Halfords was well-positioned in the UK market and that independence would enable the company to focus its efforts on growth. “Through independence, a company such as Halfords becomes a core activity, which enables management to become more focused on eliminating any inefficiencies.” Management will take a stake of up to 10 per cent in the independent company.
Barclays provided both senior and mezzanine debt for the transaction, believed to comprise about two thirds of the overall consideration. CVC was advised by Clifford Chance (legal) and PWC (accounting) and UBS (M&A).
Founded in 1981, CVC manages over $8bn in equity capital and has completed over 220 investments with a total value in excess of $30bn. The firm is currently investing from its E4.65bn European fund, which closed in June 2001.