Allied Carpets in sale talks with Hilco

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The UK's second-biggest floorcoverings retailer Allied Carpets has held preliminary talks with Hilco, the restructuring specialist, over a potential sale of the struggling chain.

Hilco's private equity business is considering buying the entire shareholding of the 218-store retailer that was put up for sale by its French owner before Christmas.

A prospectus has been sent out and first round bids for privately held Allied Carpets, which has been struggling for a number of years, are due before the end of the month. Other unnamed parties are also thought to be interested.

The retailer's parent since 1999, Tapis Saint-Maclou, which is controlled by the Mulliez family, is said to have appointed Lazard to find a buyer. Allied Carpets, Hilco and Lazard all refused to comment.

The potential sale of Allied Carpets, which employs 1,600 staff, could have major ramifications for the wider floorcoverings sector, which has been battered by the sharp downturn in consumer spend. Last summer, rival Floors-2-Go was bought out of administration; and the market leader Carpetright has recently said that trading conditions are the toughest in 50 years.

It is understood that Hilco has identified value in Allied Carpets, which is largely debt free, and a transaction is likely to see the chain continue trading as a going concern. But a potential sale to Hilco, or any other party, could result in some loss-making stores closing down. Allied Carpets employs 1,600 staff and there is no suggestion that the chain is in immediate danger.

Hilco tried to buy Woolworths before it collapsed in November for a £1, in a deal involving the restructuring company taking on up to £300m of Woolies' debt. However, a deal for Allied Carpets would be structured completely differently, not least because of the flooring retailer's lack of debt.

The sale process is understood to be progressing slowly and the signing of a deal is still some way off.

Market sources said that current trading is "dire" at Allied Carpets, along with other flooring, homeware and furniture retailers, but it was out performing some of its competitors.

Robert Clark, the senior partner at Retail Knowledge Bank, said that the better performance of rival Carpetright, whose chairman is Lord Harris, was a key reason why Allied Carpets has been struggling. "It has definitely been playing second fiddle to Carpetright over an extended period," said Mr Clark.

He added: "I think [Lord] Phil Harris has his finger on pulse of the market place and he is a very canny operator who has kept the pressure on Allied Carpets."

In 2007, Allied Carpets made an operating loss of £6.8m, on total sales of £206.9m. According to Retail Knowledge Bank, the retailer has not made an operating profit for the past eight years. Allied Carpets last made a pre-tax profit in 2005.

Publicly listed Carpetright posted a 67.6 per cent fall in pre-tax profits to £8.8m for the 26 weeks to 1 November.