Thorn sells US business for pounds 545m

THORN, the struggling Radio Rentals group, took a significant step forward yesterday when it announced the sale of its American business for a higher-than-expected figure of pounds 545m. The buyer is Renters Choice, an American rentals group which now becomes the leading player in the US market with a share of 43 per cent.

Thorn shares rose 10 per cent in early trading before the announcement was made. The sharp movement is likely to lead to a Stock Exchange inquiry as to whether news of the impending deal had leaked. Thorn shares closed 10.5p higher at 220p after touching 237.5p at one stage.

Under the terms of the deal Thorn will have no continuing liability arising from the class action brought against the company in the US. The only exception is in the states of Minnesota and Pennsylvania where Thorn has already taken a pounds 23m provision to cover the expected costs. Thorn has been taken to court in several states over its "Rent-to-Own" offers, which have been claimed to be misleading.

Thorn said it intended to return most of the proceeds of the sale to shareholders, though analysts said this might not take place until next year.

Commenting on the deal Thorn chief executive, Steve Marshall, said: "This agreement gets the implementation of our strategy to crystallise value for shareholders off to a strong start." He said management would now concentrate on the disposal of the remaining overseas Thorn businesses in Scandinavia and Asia-Pacific, which were all put up for sale last month. This process is expected to take six to 18 months.

The company will then focus entirely on its UK operations, which include Radio Rentals, Crazy George's and DER Direct.

Ashley Thomas, retail analyst at SG Securities, said: "The business is still a bit of a rag-bag. But the price on this deal was higher than forecast and it ringfences Thorn from the litigation liability in the US."

Rodney Forrest at CL Securities Europe was also positive. "I thought they would either get a lower price or be saddled with a larger proportion of the liabilities going forward," he said.

He expects a pounds 500m redistribution to shareholders. This is equivalent to 134p per share, which would leave the company with borrowings of around pounds 200m.

Thorn America trades from 1,400 outlets under the Rent-a-Center, Remco and U-Can Rent brand names. The business recorded operating profits before exceptional items of pounds 63.4m on turnover of pounds 561m.

Thorn said nothing about the bid approach made for the whole of Thorn in April, which was understood to have come from the Barclay brothers. Mr Marshal said there was "nothing new to say", but analysts said that if the talks had been called off the company would have been obliged to issue a statement to that effect.

As well as its problems in the US, Thorn has been struggling in the UK where it has paid the price for over-expansion. It is now cutting back on product selection and reducing costs. Last month Thorn reported a 30 per cent fall in annual profits to pounds 118.2m and a 2 per cent decline in sales to pounds 1.25bn.

Outlook, page19

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