Duke Street Celebrates Independence

Since its own buyout this summer, Duke Street Capital (formerly HEV) has achieved a major exit, selling Glass’s Group (story, page 23), and added to its portfolio through one new investment and two follow-on fundings.

In mid-August, Duke Street investee Focus Retail Group paid GBP68 million (ecu 97 million) cash to acquire Do It All from The Boots Company plc. Duke Street Capital III invested a further GBP25 million in Focus to fund the acquisition, which consolidates the company’s position as the UK’s largest independent Do-It-Yourself (DIY) superstore group. The merged Focus Do It All group will have a 10% share of the UK home improvements market.

Do It All made its first profit for six years in the 12 months ended March 1998, registering a GBP2.5 million operating profit on sales of GBP337 million through 139 stores. Boots, which had invested GBP80 million in the group during the past eight years, had sustained losses totalling GBP20 million from its foray into DIY retailing.

This contrasts strongly with Duke Street’s experience of the DIY market since it backed a GBP4.5 million MBO of the chain in 1988 as a minority investor, later acquiring the holdings of three other private equity backers to take its stake to 45%. Focus increased its profits in each year following the buyout and expanded its chain of outlets to 71 from seven prior to the purchase of Do It All. Duke Street Capital III’s latest investment takes the private equity group’s stake in Focus to 60%.

Duke Street Capital earlier in August paid GBP70 million (ecu 100 million) to acquire Bass Leisure Management Services (BLMS) from Bass via a newly formed vehicle, Leisure Link Group. The acquisition finance unit of Royal Bank of Scotland provided debt facilities for the deal.

The UK’s largest owner, distributor and services of amusement machines, BLMS has a 17% market share and last year made GBP8 million in operating profits on its GBP100 million turnover. Duke Street is pursuing an investment strategy focused on consolidation opportunities in selected sectors, and intends to use Leisure Link as a platform for further acquisitions to create an integrated supplier of retail services to the leisure sector.

The BLMS deal represented Duke Street’s second recent foray into the “soft” gaming sector following its acquisition of the bingo group Ritz Clubs at the end of last year and the subsequent merger of Ritz with Gala Clubs this July to form the UK’s largest bingo club operator.

Duke Street’s sale of Glass’s Group, the provider of automotive information services, also hit the headlines in mid-August. In its first direct UK investment, Hicks Muse Tate & Furst agreed to pay GBP126 million (ecu 179 million) for the group, which was majority owned by Duke Street and Caxton Iseman. Duke Street and its co-investors paid GBP32.5 million for Glass’s Group at the original buyout in September 1995.