Kesa says it expects to make a total writedown of €200m (£170m) after the disposal of its lossmaking Comet electricals chain to private investment firm OpCapita on Wednesday for the nominal sum of £2.
Following a protracted sales process, OpCapita saw off rival bidder Hilco, and will receive a cash “dowry” of £50m from Kesa to compensate for property liabilities on Comet’s 250 UK stores, which have an annual rent bill of £77m. However, Kesa will retain responsibility for Comet’s pension liabilities.
Comet has struggled in the downturn as consumers defer big-ticket purchases, and shop online to find cheaper prices on branded electrical goods. On Wednesday Kesa said it expected Comet to report losses of £22m at half-year results next month, more than double the chain’s total losses of £9m last year.
Comet reported a near 19 per cent drop in like-for-like sales in the six months to October 31, compared to the same period a year ago, despite Kesa’s attempts to revamp stores and turnround the chain.
OpCapita said that it was not planning on “a significant store closure programme or job losses,” and under the terms of sale, has agreed to run the business as a going concern for at least 18 months.
“The decision is less about the short-term environment, and more about our long-term view of the UK electricals market,” said Thierry Falque-Pierrotin, Kesa’s chief executive. “In Europe, average selling prices are higher, the online market is more fragmented and we are able to negotiate our property rents downwards.”
However, tougher trading conditions in the eurozone caused like-for-like sales at Kesa’s profitable Darty France business to drop 3.7 per cent in the same period, and Mr Falque-Pierrotin said full-year French retail profits would decline from last year. Sales dropped 8 per cent across Darty’s Spanish, Italian and Turkish operations, and the retailer is looking to cut its cost base as the proportion of internet sales rises.
Earlier this week, the tough UK marketplace prompted Best Buy, the US electrical retailer, to announce the closure of 11 “big box” stores operated in a joint venture with Carphone Warehouse, after racking up £47m of losses in six months.
The Comet disposal is expected to be completed next February, after gaining approval from Kesa’s shareholders. Lazard is advising OpCapita and Merril Lynch is advising Kesa on the transaction.
Knight Vinke, the activist investor that is Kesa’s largest shareholder and which had been agitating for Comet’s disposal, said it would vote in favour, believing it “opens the way” for Kesa to list on the French stock market. Kesa said this was not something it was currently planning to pursue.
Kesa’s shares rose 8 per cent in intraday trading but closed down 1.2p at 100.6p, a fall of just over 1 per cent.
Additional reporting by Rose Jacobs
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