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Halfords sold to CVC; no changes in management structure - BikeBiz

Halfords sold to CVC; no changes in management structure

Earlier today Boots Co PLC announced the sale of Halfords to Euro-wide investment portfolio business CVC Capital Partners for £427m. CVC owns a diverse range of 80+ businesses, including UHU adhesives of Germany, Formica of the US, opticians Dollond & Aitchison, vehicle retailer Dutton Forshaw, bookmakers William Hill, and booze manufacturers Bols of Holland and Rémy-Cointreau of France.
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CVC will pay £410m in cash on completion and a further £17m on the achievement of sales targets this year.

Boots, owner of Halfords since 1989, announced in April that it planned to divest itself of Halfords through either a demerger or sale.

"The fact that we have gone for a sale must tell you that this is more value creating than the demerger option," said a spokesman for Boots.

The sale is expected to be completed at the end of August and is subject to European Commission approval.

Boots intends to return the net proceeds of the sale to shareholders "in the

most effective way," said the spokesman.

He would not be drawn on whether this will be through a share buy-back or special dividend.

"We'll take the view when the cash is in the bank," he said.

CVC is acquiring the Halfords chain of 400 stores and the head office in Redditch. All 9800 Halfords employees will transfer with the business.

Boots chief executive, Steve Russell, said: "Halfords is an excellent, market-leading business. I am confident it will continue to grow under new ownership."

Jonathan Feuer, MD of CVC, said: "This is a good opportunity for CVC to acquire a strong retail business with considerable national coverage. We look forward to building on business opportunities and implementing a focussed strategy for growth. The acquisition represents CVC's continued strategy of investing in well-positioned businesses on a long-term basis despite the current volatility of world stock markets."

CVC is an independent multinational buy-out firm with a European network of eleven offices. Founded in 1981, CVC manages over US$8b in equity capital and has completed over 220 investments with a total value in excess of US$30b.

In 2001 KPMG Corporate Finance ranked CVC as number one in transaction value for continental Europe buy-outs completed over the last decade.

The group is said to be totally behind the continued roll-out of Bikehuts. There are IBD-apeing Bikehuts in 117 of the 400 Halfords stores nationwide with the format being in all superstores by 2005, including 31 new Bikehuts ready by the end of August this year. Halfords has 330 superstores, 58 high street stores and 12 motorway stores.

One of the reasons for the purchase, said Feuer, was "an upturn in cycling as a leisure activity."

David Clayton Smith, director of marketing and merchendise at Halfords, told BikeBiz.co.uk that Halfords execs have been working closely with CVC execs since the group announced its interest in the auto accessories-and-cycles chain. There are no plans for a management clear-out.

"There is a strong management team already in place at Halfords so [CVC] will not be hands on in the sense of getting involved in the day-to-day business of Halfords," said Clayton Smith.

"CVC is a specialist fund investment company so they will wish to be involved in determining our strategy at a higher level. CVC is committed to pursuing our exciting growth agenda through the continued investment in our new format Arcade stores which, of course, include the Bikehut format."

The split with Boots was necessary, said Clayton Smith.

"Boots recognised the value opportunity in Halfords and have consistently supported our strategy and investment requirements. We both recognised that this was the right time to go for a separation. We do recognise this as a 'next step' opportunity for the Halfords management team who will be 100 percent focused on the business.

Rod Scribbins, the MD of Halfords, becomes the new CEO. The company name will remain as Halfords Ltd which will be wholly owned by CVC.

In Q1, sales at Halfords were up 5.5 percent, excluding the garage services business sold

last year, but down 0.2 percent on a like-for-like basis. In the financial year to 31st March 2002, Halfords had a turnover of £529m with profits of £54m. The net assets of Halfords subject to the CVC transaction were £144m and attributable goodwill previously written off to reserves was £349m.

At 10.00am this morning shares in Boots were up 16-1/2 pence at 570, reflecting the rebound in the FTSE 100 index, up 155.1 points at 3932.1.

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