Buyout Firms Battle for Sofa Retailer DFS

LONDON (Reuters) – Advent International, Permira and Cinven are in the second round of an auction of British sofa retailer DFS, which could fetch up to 500 million pounds ($784.3 million), people familiar with the process said.

A fourth private equity firm could also remain in the running for the sofa chain, some of the people said.

Chairman Graham Kirkham took the sofa company, which he founded in 1969, private again in 2004. In January DFS said it had hired a “City adviser” to help it explore options including a possible stock-market listing or “third-party investment”.

Private equity firms are eager to do deals after a year spent fixing portfolio companies and being unable to secure debt financing for acquisitions.

However, despite the successful sale of pet shop chain Pets at Home, confidence in the sector has been knocked by the collapse of the sale of Matalan [MTLAN.UL] and the shelving of New Look’s initial public offering (IPO).

Kirkham could yet opt to keep the business, and perhaps refinance it himself, one of the people said, adding that its lower growth rate, and hefty marketing and rent outlays, made it harder to raise debt against this business than Pets at Home.

Permira has teamed up with John Lovering, the outgoing chairman of retailer Debenhams, a person familiar with the situation previously told Reuters.

DFS and the private equity firms all declined to comment.

By Simon Meads and Quentin Webb
(additional reporting by Victoria Howley, editing by Will Waterman)