Permira completes successful Homebase sale

The European buyout firm has sold its remaining interest in UK DIY retailer Homebase to Great Universal Stores in a £900m deal.

European private equity house Permira has made a speedy return on its £750m acquisition of UK DIY retailer Homebase last year, selling the business to UK retail group GUS for around £900m.

 

The business, acquired by Permira (formerly Schroder Ventures) from J Sainsbury in March 2001, has enjoyed steady growth since then, achieving a three-fold increase in operating profit from £26m last year to just under £86m in the year to February 2002. The company is projecting operating profits of around £100m for the current financial year. 

 

Homebase is the third largest DIY retailer in the UK, behind B&Q and the Focus Wickes group, in which Duke Street Capital holds a 55 per cent stake. Homebase currently has 272 mainly out-of-town stores, biased to the more affluent South-East. 

 

Homebase’s strong results enabled Permira to make an ahead-of-schedule repayment of £240m to investors in April this year, including J Sainsbury, which retained a 17 per cent stake in the business, and Schroder Ventures International Investment Trust Plc (SVIIT), which will have received proceeds of approximately £109m from its investment against a total commitment of £20m. Sainsbury receives a further £139m from the sale, taking its total proceeds on Homebase beyond the £1bn mark.

 

Permira’s investment in Homebase came at a time when the business was enjoying strong growth. The £12bn DIY market has grown by eight per cent per annum over the last five years, while the £20bn home furnishings market has grown by seven per cent annually. Both have grown faster than total retail spending and this is expected to continue.

 

Homebase will become part of the Argos Retail Group (ARG), a UK multi-brand high street retailer. GUS says it hopes to use ARG’s existing infrastructure and supply chain, logistics and financial services to generate cost savings of over £20m within the first three years.

 

Deutsche Bank, Schroder Salomon Smith Barney and UBS Warburg were hired earlier this year to look at a possible flotation or trade sale for Homebase but did not take part in the sale process. 

 

The transaction is subject to review by the UK Office of Fair Trading.