Telegraph reports sale of Halfords would be a 'surprise'

Really? Not to the bike trade. It's been clear for many months that CVC has been grooming the retailer for a quick sale. Anyway, The Sunday Telegraph puts flesh on the bones: CVC is said to be close to appointing bankers to advise on the sale. And where did the Telegraph get this info? Could it be PR leaks from Halfords? Such briefings to the financial press are to be expected, as perceived value is added to the recent cash-gains thanks to the bouyant bike market and the car customisation cruiser craze.
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The Sunday Telegraph reports that CVC Capital Partners has spoken to a number of advisers, including Deutsche Bank and Merrill Lynch.

"The decision will take the retail sector by surprise as it comes just 16 months after the private equity group acquired the firm from Boots for £427m," said the Telegraph reporter.

The Telegraph surmises any sale would have to be in the region of £600m.

"Halfords has been transformed since CVC bought the business in July 2002. The company is trading more aggressively and has cut its costs," reports The Telegraph.

But at what cost to long-term business relationships with key suppliers? CVC-appointed execs have certainly been 'aggressive' by making suppliers agree to new trading terms and slashing their margins. Merida, maker of the Carrera house-brand bikes, has recently decided to re-launch the Merida brand in the UK, a move that analysts believe is directly connected to the way suppliers were treated earlier this year.

Of course, suppliers are ten-a-penny and Halfords may feel it can easily appoint new ones. But the owners of top-end bike brands, which have long been courted by Halfords/Bikehut, are now finding it a lot easier to ignore the retailer's pleas.

With the recent move down-market, sales at Halfords have been ramped up and any new owner will probably prefer this lowest common denominator approach rather than the boutique store-within-a-store approach that Bikehut was meant to be all about.

CVC probably cares little about the long-term health of the UK bike market - and why the hell should it - but a down-market Halfords is not good news for the UK bicycle industry. And were Halfords to be sold to a pile 'em high, sell 'em cheap retailer early in 2004 - which is entirely feasible given the current trading direction of the 400+ stores - there would be a lot of suppliers crying into their beer by the Spring.

http://www.telegraph.co.uk/.../main.jhtml?xml=%2Fmoney%2F2003%2F11%2F23%2Fcncvc23.xml&secureRefresh=true&_requestid=74793

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