Philip Green pays £200m for Bhs chain

Storehouse, the struggling high street group, yesterday announced plans to sell its Bhs division to retail entrepreneur Philip Green for £200m. He said he had no plans to break up the chain but would run it as a going concern.

The sale will enable Storehouse to return £100m to shareholders with the group then concentrating on revitalising its Mothercare chain. The company plans to adopt the Mothercare name later this year, spelling the end of the Storehouse conglomerate built up by Sir Terence Conran in the 1980s.

"I didn't see any purpose in Storehouse," said Alan Smith, chairman since 1996. "It's never been a successful combination of businesses."

Though the sale price for Bhs was higher than expected, Storehouse shares fell 7p to 43p on disappointment that there was no bid for the whole group. Storehouse said it was no longer in talks for the entire company, though it had signed a contract under which Mr Green would be eligible for £10m compensation if a bidder emerges.

The deal gives Mr Green 161 Bhs stores, which made a loss of £8.3m in the six months to October. Mr Green, who backed off from making a hostile bid for Marks & Spencer last month, said it was too early to reveal his plans for the chain, though he said he would not break it up.

Mr Green said: "I think this a good opportunity for a turnaround. Its not as if they are the only people that are struggling in this sector at the moment. It is a well-known name that has lost its way, like many others. It just needs to do the basic things right. It's not rocket science."

He said there were no plans for major redundancies among Bhs' 14,000 staff. "I'm not planning a major savaging," he said.

However, retail experts say Mr Green is likely to raise cash by selling some of the top Bhs stores and refocusing the chain around a more value for money offer. It is possible he may also change the name.

Mr Green was left as the only serious bidder for Bhs after Iceland and Brown & Jackson, the Poundstretcher group, backed out in the last two weeks.

Mr Smith said he was looking forward to rejuvenating the Mothercare format, which has been undermined by competition from Asda's George range, Tesco and Hennes & Mauritz: "The problem was with the clothing range and getting trapped in small stores."

Mothercare has 280 stores with plans to add to its group of 80 larger outlets in out-of-town locations. Mothercare is expected to record sales of around £400m this year. In the six months to October it recorded a loss of £3.3m.

Storehouse was created in 1986 when Sir Terence Conran merged his Habitat-Mothercare business with British Home Stores.

But the business was plagued by management changes and takeover bids. In the last five years it has become a byword for high street underperformance.

Richard Hyman of Verdict, the retail consultants, said: "It was a flawed concept. The various parts always operated independently and the synergies were difficult to see."

He added: "There is definitely a future for Mothercare. It has a natural constituency but has not been well run."

On Bhs, he said he expected Mr Green to lower costs by re-negotiating terms with landlords and suppliers.