Lord Kirkham, the executive chairman of DFS, yesterday made a £445m bid approach for the sofa group he founded 35 years ago, just weeks after it issued a profit warning. But his indicative 415p-a-share offer failed to impress the City, which bet on another suitor emerging by marking shares in the group 9 per cent higher to 443p.
The Conservative party donor, who has taken some £400m out of the group since floating it 10 years ago, said fierce competition in the home furnishings market meant DFS would struggle to grow. A swarm of new entrants, from MFI to Matalan, had muscled in on his company's territory over the past 18 months, he said, causing its sales to slide during its peak January trading period.
"In the new retail environment and financial landscape we won't be able to perform as well as in the past and will disappoint as a public company," Lord Kirkham warned. "We are getting not just new players but serious new players and they are all coming at once." Last week, Marks & Spencer became the latest retailer to step up its attack on the sector by opening a new store dedicated to selling everything for the home, from sofas to barbecues.
Most analysts said Lord Kirkham's offer undervalued DFS, with Merrill Lynch suggesting a bid of 450p a share would be fairer. However analysts at Numis Securities said: "For a business with profits going backwards, we would not consider this to be an under-generous offer."
Lord Kirkham, whose family has about 10 per cent of the stock, denied he was attempting to flush out other bidders by undervaluing the group. "That's one tenth of 1 per cent of interest to me," he said. "My aim was and is simply to buy the business. It's my business and I'd like it back please."
He is prepared to invest £150m of his family's money in taking the company private and has lined up the Japanese bank Nomura to arrange some £300m of debt financing. The company was floated in November 1993 and has since become Britain's biggest sofa seller. Lord Kirkham said he wanted to stop opening new stores and conserve the group's market share. "We've probably had our best 10 years and those were the ones we've been listed," he added.
DFS said an independent committee of directors would consider Lord Kirkham's proposal, which is subject to financing and due diligence, and update the market in due course.Reuse content