Hilco close to acquiring Habitat

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The Independent Online

Hilco, the retail restructuring firm, is leading the race to acquire the ailing furniture chain Habitat and a deal could be unveiled in days.

The retail debt specialist plans to turn around Habitat, which has 35 stores throughout the UK, in a number of the countries in which it operates. While Hilco wants to take the retailer forward, it is likely to ditch unprofitable branches and may exit some overseas operations, which includes franchisees.

Habitat was once seen as an icon of style after it was founded in 1964 by the designer and restaurateur Sir Terence Conran. He no longer holds shares in the company.

The chain has lost its way in recent years and slumped to a widening pre-tax loss of £13.4m, on flat UK sales of £94.9m, for the year to 30 March 2008, its latest set of accounts.

It is thought that multiple parties have expressed an interest in buying Habitat, including Dwell, a 12-store furniture retailer. However, it is unclear whether it is still interested or has the economies of scale to take on Habitat, which has 24 shops in France, six in Spain and five in Germany.

Speculation has also surrounded Habitat's chief executive Mark Saunders, who reportedly submitted a bid about a month ago which was rejected by Habitat's owners the Kamprad family, who are heirs to Ikea retail empire. Mr Saunders is still believed to be confident about staying at the helm whoever buys Habitat.

Sources say that Habitat's parent company, Ikano Group, is willing to accept a nominal fee or pay a third-party to take it off their hands, given that the chain is losing money, has a revolving credit facility of up to £40m and requires a significant investment in its IT, logistics and stores.

It is thought that whoever buys Habitat will not have to take on its burdensome pension fund, as the owners have struck a deal with the pension trustees. Habitat is thought to have enjoyed a 11 per cent increase in like-for-like sales since 1 April, helped by its celebrity-led advertisements.

Hilco, which tried to buy Woolworths late last year, backed a management buyout deal for Borders in July, but the 45-store bookseller fell into administration last month.

Hilco, Dwell and Habitat declined to comment yesterday.

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