Ten years after listing, Kirkham is on brink of taking DFS private again

Independent directors back improved 442p-a-share offer from sofa company's founder

Lord Kirkham, the boss of DFS, yesterday edged closer to regaining control of the sofa retailer he founded more than three decades ago when he bowed to shareholder pressure and raised his proposed takeover bid to 442p per share.

Lord Kirkham, the boss of DFS, yesterday edged closer to regaining control of the sofa retailer he founded more than three decades ago when he bowed to shareholder pressure and raised his proposed takeover bid to 442p per share.

The revised offer, which compares with an initial proposal of 415p per share, won the support of the company's independent directors who said they believed that any firm offer "should be recommended to shareholders". However, shares in the group rose 5 per cent to 444.75p, reflecting optimism that a white knight could emerge. The City was split on whether investors would back Lord Kirkham.

One top 10 shareholder said: "We are slightly underwhelmed. It's not a huge knockout bid." Andy Gray, a fund manager at Scottish Widows, which owns a 4 per cent stake in DFS, said: "We are minded to sit back and wait," despite conceding: "The offer is more in the ball park of where we were looking and worth considering." Some shareholders have said they want at least 450p per share.

Lord Kirkham's bid, which comprises 435p per share in cash plus the 7p interim dividend, values the retailer at around £478m. It comes days after the group issued a gloomy set of interim figures and warned that full-year profits would miss expectations.

The company also flagged the possibility of a multimillion-pound windfall for shareholders if the company wins a long-running battle with Customs & Excise over whether it should pay VAT on interest-free purchases. The company has ring-fenced more than £60m which it could pay out to investors via a special dividend if it wins all of its cases against Customs & Excise, although sources close to the group cautioned that the legal disputes were likely to drag on for at least two years.

In an attempt to justify their decision to grant Lord Kirkham and his financial backers, Nomura, access to the company's books, the independent committee set up to consider the bid admitted they had been rattled by the founder's threat to leave. The committee, headed by Mike Blackburn, a former boss of Halifax, said it had taken "the continuation of Graham Kirkham's important contribution to the success of the company" into account.

Given that Lord Kirkham is to DFS what Bernard Matthews is to frozen turkeys, the non-executives know they must tread carefully when it comes to the question of his future at the group. Lord Kirkham, 59, admitted that it was the prospect of being forced to retire in December when his contract runs out that prompted him to make his takeover approach. The multimillionaire, who bragged recently that he "doesn't come to work for the money", said: "This business is part of me. It's what I do. I can't conceive life without it."

Which is perhaps is why his threat of leaving appears to have fallen on the deaf ears of some shareholders. "I think it's a cheap shot we can ignore," one fund manager said. "There's no question of Kirkham going. He's very committed to it. He loves it."

Scottish Widows' Mr Gray added: "It would be disappointing if he did go; he's done a great job building up the business. But life goes on. Another retailer could come in and do a good job."

That Lord Kirkham is Britain's Mr Sofa is undisputed. His 67-store strong chain sets the competitive bar for the growing number of rivals that have turned their attention to the upholstery market. DFS's sales per square foot, which slipped 3.5 per cent during the past six months to £493, are more than double those achieved by Furniture Village - its closest opponent - while its sales per retail employee, a shade under £500,000, also outflank rivals.

A self-made man, Lord Kirkham's autobiography would read like an entrepreneurial fairy tale if he was ever tempted to write one. Adopted into a Yorkshire mining family, he left school at 16 after failing his five O-levels. The part-time chimney sweep job that he took aged 11 cannott have helped his studies although his lack of qualifications did stymie his dreams of becoming an RAF pilot.

Not that it has held him back. His £257m personal fortune earned him joint-172nd place in The Sunday Times list of Britain's richest.

Rather than fly planes, Graham, as he was then known, started work as a salesman with Hardy's, a high street furniture company that later formed part of the Harris Queensway group. By 22, he was managing a shop while running a fledgling business on the side selling furniture via agents whom he persuaded to turn their front rooms into showrooms. Two years later, in 1969, he put the business knowledge acquired at night school to the test, opening his first shop. Although the fact that the DFS folklore would have you believe the first outlet was located in a former brothel outside Doncaster is testimony to Lord Kirkham's renowned sense of humour, the less colourful truth is that it was located in a former billiards hall.

The sofas and armchairs were made upstairs and displayed in the showroom downstairs, and it wasn't long before that one shop blossomed into the Northern Upholstery Group. The company changed its name in 1983 when Lord Kirkham acquired DFS out of administration, and it was listed on the stock market 10 years later.

With the float came the fortune, the Georgian mansion, the art collection, a knighthood and the eventual peerage. It also allowed Lord Kirkham to demonstrate his gratitude to the Tories with a £4m shot-in-the-arm donation that got John Major's government out of a financial hole. Friends at the time said the gift was his way of saying thank you to a Conservative government that created the benign economic conditions that enabled his business to flourish.

Although Lord Kirkham, who is DFS's biggest shareholder with a 10 per cent stake, was too busy wooing shareholders to comment on his raised offer yesterday, he is understood to be anxious to wrap up a deal quickly. He is planning to invest £150m of his own money in the deal.

Unveiling interim results late last month, he attempted to justify his approach by painting a bleak picture of the competitive landscape, which has seen the likes of MFI and Next jump on the upholstery bandwagon.

The new sofa boys in town have been poaching DFS staff, with staff turnover hitting 40 per cent in some areas, he grumbled. Denying the company was in "meltdown mode", despite the downbeat tone struck in its statement, Lord Kirkham hit back at suggestions that the company was a dog, adding: "If DFS was a dog it would be a Crufts champion." However he surprised the City by applying the brakes to the company's hitherto rapid expansion programme, once the seven new stores it is contracted to open are up and trading.

Analysts, who had argued the business was worth more than Lord Kirkham's original £460m approach, grudgingly admitted that his new offer would probably succeed.

"It's a bit cheap, but not as cheap as it was," Richard Ratner, at Seymour Pierce, said. The question now, analysts added, was whether the independent committee can tempt any rival bidders to enter the fray. Given their absence thus far, and Lord Kirkham's inbuilt advantage as the group's founder and executive chairman, most reckoned that the odds were stacked against a bid battle.

Start your day with The Independent, sign up for daily news emails
Keith Fraser says we should give Isis sympathises free flights to join Isis (AFP)
Life and Style
Google celebrates the 126th anniversary of the Eiffel Tower opening its doors to the public for the first time
techGoogle celebrates Paris's iconic landmark, which opened to the public 126 years ago today
Cleopatra the tortoise suffers from a painful disease that causes her shell to disintegrate; her new prosthetic one has been custom-made for her using 3D printing technology
newsCleopatra had been suffering from 'pyramiding'
Arts and Entertainment
Coachella and Lollapalooza festivals have both listed the selfie stick devices as “prohibited items”
Nigel Owens was targeted on Twitter because of his sexuality during the Six Nations finale between England and France earlier this month
rugbyReferee Nigel Owens on coming out, and homophobic Twitter abuse
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Client Services Assistant

£18000 - £20000 per annum: Recruitment Genius: A Client Services Assistant is ...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor