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Price gap means Woolworths to de-merge

Despite many expecting to see Kingfisher sell its Woolworths chain of stores to a private equity bidder, it has instead opted to de-merge the operation.

Kingfisher, the UK retail conglomerate, has been under pressure from shareholders to action a recovery plan in order to bolster the group’s shareprice and had been widely tipped to sell Woolworths as part of this plan.

A host of private equity firms were said to have signaled interest in bidding for the well-known high street retail chain – including Cinven, Nomura’s Principal Finance Group and KKR – but the company today confirmed that it had halted all discussions with such bidders. The widely held view as to why negotiations foundered is that no bidder was prepared to accept Kingfisher’s valuation for the business.

The alternative will see Kingfisher bundle Woolworths with its Superdrug and entertainment operations and then list the resulting company separately.

In a statement, Sir Geoffrey Mulcahy, Group Chief Executive said “having diligently assessed all the options, the Board is now confident that a demerger is the best solution for shareholders, employees and the long term success of the businesses.” He further commented: “these businesses are now in good shape to prosper as a stand alone UK-listed company with a dedicated management team focused on future success.”

The company also confirmed that it intends to move quickly with the de-merger. It said that it has been scheduled to take place in the second quarter of Kingfisher's financial year – which ends in early August. The company also advised that its plans to sell the freehold property assets of its General Merchandise businesses are also progressing.