Habitat purchase in store for IKEA chain

THE distinctive blue and yellow of Sweden may be about to make its mark on the high streets of Britain.

IKEA, the Swedish furniture store chain, is believed to be close to concluding a deal to buy Habitat. An executive at Storehouse, the company that owns Habitat, said IKEA entered the bidding at 'the eleventh hour', when talks with another potential buyer, thought to be France's Au Printemps, were well under way.

The price to be paid by IKEA, which decks its cavernous stores in the distinctive national colours, is thought to be about pounds 55m. Included in the sale are Habitat's UK and French chains, but not its US arm, which lost pounds 7.7m out of a total Habitat loss of pounds 8.8m last year.

IKEA's purchase would strike a chord with Sir Terence Conran, Habitat's founder. He has harboured hopes of returning to his old stamping ground but is only prepared to put in pounds 2m of his own money, preferring to keep his funds in his expanding restaurants business. Habitat was a retailing phenomenon for much of the 1960s and 1970s, only to lose its way in the 1980s. Some of that decline can be attributed to IKEA, which has prospered since its arrival in Britain five years ago with a superstore in Warrington. Last year, despite having just three stores - Warrington, Birmingham and Wembley, north London - it was Britain's sixth largest furniture retailer.

This year, its progress has continued unabated. A fourth store, in Gateshead, has been added and a fifth, in Croydon, will open on 5 November. So far in Britain, IKEA has stuck to a rigid format of huge, out-of-town stores (Croydon will cover almost 200,000 square feet), each with creche, children's playground and family restaurant. More like warehouses than stores, they specialise in clean-cut, low-budget furniture and household items, aimed at the young, style-conscious middle class.

The stores, which open on Sundays, are packed at weekends. Last year, IKEA accounted for 0.7 per cent of the British furniture market, against 9.4 per cent for MFI, the market leader, and 0.4 per cent for Habitat, with its far greater presence.

Au Printemps is thought to have been mainly interested in acquiring Habitat France. However, City analysts say it is unlikely France would be sold without the UK. Another potential bidder, Antah European Holdings, the Malaysian-owned private company that runs the 50-strong chain of Carpenters furniture shops in the south of England, is also understood to be out of the running.

IKEA, which had earlier denied rumours of a Habitat purchase, refused to comment on Friday. A Storehouse spokesman also declined to comment.

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