In the next few weeks, CVC Capital Partners, the European private equity group, will decide on a possible sale or flotation of UK car parts and accessories retailer Halfords, which it bought from chemist shop chain owner Boots for £427 million in July 2002. After successfully turning the company around, CVC stands to make a good return on its original investment if Halfords is sold.
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CVC has approached a number of investment banks, including Deutsche Bank and Merrill Lynch for advice on the sale of the retailer.
Halfords is the UK’s largest retailer of the car parts, accessories, and cleaning and care products market. It holds a share of around 20% in market that is valued at approximately £2 billion and it is benefiting from the increasing trend among drivers to customise their cars.
Halfords has been transformed since CVC acquired the business in July 2002, with new trading formats, a new refurbishment programme and new product lines including outdoor clothing and equipment.
The company has used its recent strong trading cash flow to pay much of £400 million in debt that was taken on at the time of the sale. In the financial year to March 31 2002, Halfords, which employs 9,800 people in over 400 stores across the UK, reported sales of £529 million and made an operating profit of £54.3 million.
CVC is expected to sell the company to a trade or financial buyer, with some media reports in the UK suggesting the disposal could take the form of a secondary buyout by another venture capital firm. Alternatively, CVC may opt to float Halfords on the stock exchange after the company’s financial year-end next April.
Halfords’ turnaround could give CVC a substantial return on its original investment if the company is sold. According to investment banks, a flotation or trade sale could pull a value of up to £600 million.
