Tom Hunter sells Birthdays chain at £14m discount

Tom Hunter, the millionaire retail entrepreneur who is friends with Philip Green, yesterday sold the struggling Birthdays greeting card chain for nearly £14m less than he bought it for.

Mr Hunter's investment vehicle gazumped Clinton Cards to buy Birthdays in August 2003 for an estimated £60m. Yesterday it sold Birthdays to Clinton Cards, its main rival, for just £46.4m excluding debt.

Mr Hunter's spokesman said: "The opportunity wasn't as rosy as we'd anticipated." He claimed that Mr Hunter's bid vehicle, West Coast Capital, had made only a "marginal loss" on the deal. He said the move had proved a mistake after his group unearthed mountains of old stock and IT systems that barely worked.

For Clinton Cards, the deal was a case of fourth time lucky.

Don Lewin, the group's chairman, had wanted to buy Birthdays since it was first put up for sale eight years ago. Mr Lewin said: "Each time the price got lower and lower."

He plans to run Birthdays, which appeals to a lower social demographic than Clintons, as a separate chain. The combined group will have more than 1,250 shops and control almost a quarter of the greeting cards market.

Iain McDonald, at Numis Securities, said: "Clinton was chugging along quite nicely with its own organic strategy and we think that this move increases the risk profile." Rhys Williams, at Seymour Pierce, called the move "positive" but warned of "sizeable execution risk" given the challenges of turning round 500 shops that have not received any investment for five years.

Mr Lewin said it would take two years for the business, which made an operating loss of £1.2m in the nine months to 27 March, against a £1.1m profit the previous year, to contribute to group earnings. He expects Birthdays, which had sales of £114m during the nine months to March, to break even in its first full year of ownership.

All of Clinton Cards' previous attempts to acquire Birthdays were trumped by private equity houses. Permira bought the group eight years ago, later selling down its investment in two stages to its rival, 3i.

Clinton Cards shares closed 6.5p higher at 94.5p.