CVC to recycle Halfords

CVC Capital Partners is gearing up to sell Halfords, the bicycle and car parts chain it acquired last year from Boots in a £427m deal.

It is understood that the venture capital giant has approached investment banks and asked several to pitch for advisory roles on a possible sale which, should CVC decide to proceed, is likely to occur next year. A raft of big- name institutions are in the frame to work on the ex-pected deal, including Merrill Lynch, Deutsche Bank and UBS. It is understood the sale could either take the form of a flotation or a secondary buyout by another venture capital firm.

Halfords, which has around 400 shops and employs nearly 7,000 people, reported annual profits of £54m on sales of £529m at the time of the last sale. After securing the chain, CVC said it had around 20 per cent of its market, meaning it still had "considerable" room for growth.

That CVC is now considering an exit strategy just over a year after acquiring the business is thought to indicate how well Halfords has performed under its new owners.

CVC is associated with a number of stores and retail deals. Most recently, along with rival Texas Pacific, it was part of the Baroness Retail consortium's £1.72bn offer for department store chain Debenhams. It was also involved in the successful bid last month by pub group Spirit for brewer Scottish & Newcastle's retail estate. The 1,400-strong portfolio sold for £2.5bn.

Other European companies in the CVC portfolio include Swedish DIY retailer Danske Trelast, Spanish-based supermarket chain Supermer-cados El Arbol, and Dutch business the Retail Network Company. The firm is chaired by Michael Smith, who has pursued the retail strategy because low interest rates and strong consumer spending over recent years mean there are a number of opportunities within the sector. He also pre- sides over one of Europe's biggest venture capital funds, at around €4.65bn (£3.3bn).

Boots, the health and beauty retailer, acquired Halfords as part of the £900m acquisition of retail conglom- erate Ward White in 1989. The deal, which also included the DIY chains Payless and Fads, was heralded as central to Boots' expansion plans. But it ended up costing the retailer over £500m in write-downs.

Most of the ill-fated Ward White businesses were sold off in the late 1990s, leaving Boots with just the non-core Halfords. Although known to be up for sale since then, it was not until last April that former chief executive Steve Russell finally set the ball rolling by announcing plans to demerge it. Following the eventual sale in August to CVC, Boots has been returning some of the cash raised to shareholders.