Private equity sets sights on HobbyCraft

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The Independent Online

A bidding war is set to break out for HobbyCraft after more than 12 private equity firms entered the race to acquire the arts and craft retailer, which is up for sale for as much as £75m.

The private equity firms Phoenix Equity Partners, Lloyds Development Capital, Graphite Capital and Bridgepoint Development Capital, among others, have all expressed an interest in the 47-store retailer. First round bids are scheduled for the last week of February.

Halfords, the bike and car accessories retailer, is also understood to be considering a bid for HobbyCraft. Halfords, HobbyCraft and the four private equity firms all declined to comment yesterday.

HobbyCraft, which is owned by the Haskins family, has attracted such substantial interest because it is regarded as having the potential to grow to 180 stores in the UK and is a "category killer" with no sizeable competitors.

On a far larger scale, these growth nuggets are similar to those that persuaded the US buyout giant Kohlberg Kravis Roberts to pay £955m for Pets at Home, the UK's largest chain of pet accessory shops, last month.

Another retailer currently on the market is Cath Kidston, the homeware and clothing retailer, and first rounds bids were due in on 29 January. It is also on the market for as much as £75m.

HobbyCraft has stormed ahead in the recession as customers return to "make-do-and-mend" activities, and posted Christmas like-for-like sales up by 10.6 per cent for the six weeks to 3 January.

At the time, Chris Crombie, HobbyCraft's chief executive, said: "HobbyCraft served over 6 million customers in 2009 and we estimate that over Christmas four million cards were 'HobbyCrafted'."

The retailer's earnings before interest, tax and depreciation rocketed by 42 per cent to £7.5m for the year ending 22 February 2009, its latest accounts filed at Companies House, and this figure is thought to have increased again this financial year.

HobbyCraft is priced at between £70m and £75m, with the sale process being handled by Grant Thornton, the accountancy firm.

The fact that more than a dozen private equity firms, as well as Halfords, are interested in HobbyCraft suggests that a potential sale will easily hit the top end of the company's price expectations.