Apollo gets into Focus

After a successful revised €1.62bn offer for Countrywide, US buyout giant Apollo has turned its sights on ailing DIY business Focus.

Apollo Management hit the UK M&A headlines twice last week with its success at trumping 3i in the auction for property business Countrywide and its reported rescue talks with management at struggling retailer Focus DIY.

Founded in 1990 by Leon Black and Michael Gross, former executives at high-yield bond pioneer Drexel Burnham Lambert, the firm makes buyout investments (a US$10.1bn fund was raised early last year) as well as managing real estate and distressed debt funds.

Best known for big-ticket US deals such as Harrah’s, Intelsat, Linens N Things and Realogy, Apollo has also made strides in Europe prior to Countrywide and, if successful, Focus.

Last August, Apollo acquired the logistics division of TNT, the Dutch postal and express company, paying €1.1bn to beat competition from Blackstone, PAI Partners, Clayton, Dubilier & Rice and Bain Capital.

Now Apollo Management is reported to be in talks with the owner of Focus DIY, Duke Street Capital and Apax Partners, following a prolonged period of concern that the UK DIY retailer would default on its loan covenants.

While Duke Street is understood to have more than returned its original outlay from the sale of Focus unit Wickes for £950m in late 2004 and recouped £120m from Apax’s acquisition of a 29% stake, a current price tag for Focus is not expected to match its current debt levels of £280m, meaning a sale would be at a loss. Apollo is likely to look to restructure Focus and save it from bankruptcy.

The acquisition of UK estate agents chain Countrywide PLC has progressed towards completion following the High Court of Justice confirming on May 8 the reduction of capital required to effect the recommended acquisition by Castle Bidco, the takeover vehicle of private equity firm Apollo.

Countrywide has requested the suspension of the listing of the company’s shares on the London Stock Exchange with effect from 8am on May 9. Cancellation of the listing and trading is expected to take place shortly, following the delivery of court orders to the Registrar of Companies.