Kesa Electricals has sold Comet to the private investment firm OpCapita for a nominal fee of just £2. But the parent company was forced to pump £50m into the loss-making UK electricals chain and retain its pension liabilities to get rid of Comet.
To safeguard the 246-store chain's immediate future, Comet will receive a total of £120m, with OpCapita putting in £30m of equity and Burdale, a subsidiary of Bank of Ireland, providing an asset-backed loan of £40m.
But in the half-year to 31 October, the problems of Comet were laid bare, as it sank to a half-year loss of €26m (£22m) after its like-for-like sales fell 19 per cent.
The sale of Comet caps a tumultuous week for the UK electricals sector and comes just two days after Best Buy UK said it will close its 11 stores before Christmas. The market is suffering from a slump in consumer spending on big-ticket items and the structural shift to online. OpCapita intends to run Comet as a going concern for at least 18 months from the expected completion of the deal in February. The investment group denied speculation it plans to close waves of Comet's shops.
An OpCapita spokesman said: "At this stage, we don't intend for there to be a significant store-closure programme or significant redundancies."
OpCapita believes it can improve Comet's performance in areas such as selling higher-margin products, growing online and trimming costs. Market sources believe it plans to cut costs at Comet's head office, for instance.
But Matt Piner, the lead consultant at Conlumino, said: "Comet's new owner faces a gargantuan challenge to return the brand to success."
Kesa put Comet up for sale in June following pressure from shareholder Knight Vinke, which wants it to focus on its Darty chain on the Continent.
While Kesa will get a return if Comet is sold for more than £70m, David Newlands, the group's chairman, said: "We had to pay them [OpCapita] to sell the business... But we are writing that £50m off." Kesa has also been forced to retain Comet's pension scheme, which has a deficit of €45.9m. But Kesa has offloaded the leases on Comet's stores, which have an annual bill of €90m, to OpCapita.
OpCapita has run BUT, the French electricals and furniture chain, since April 2008. It owned the now-defunct furniture chain MFI, under its previous guise of Merchant Equity Partners.
Deal squeezes out that extra bit of value...
Why £2 price for Comet, rather than the usual £1 that changes hands in a distressed sale? Well, in a trick beloved of Comet's own sales staff, Kesa has wrung some extra revenue out of its customer for an extended warranty (the arm of Comet that sells these policies is a separate company and had to be bought in its own right). Not that OpCapita will ever be able to claim, mind you.