Schroder Ventures gets into DIY

Schroder Ventures has backed the management buyout of Homebase, the do-it-yourself (DIY) business of J Sainsbury plc. J Sainsbury has retained a 17.8 per cent stake in Homebase with the remainder being held by Schroder Ventures funds (71.2 per cent) and 11 per cent, which the management team will subscribe for in due course. The transaction is subject to clearance by the European Commission; clearance is expected in the first quarter of 2001.

The management team is the one that was incumbent at Homebase and John Lovering will lead it as chairman. Lovering is a trusted hand having been involved on the management of six private equity backed transactions in as many years. His CV includes time as finance director at Sears plc (1988 to 1992) and as chief operating officer at Tarmac plc (1992 to 1995). Aside from his latest posting at Homebase, Lovering also chairs at Birthdays, the greeting card retailer, Odeon Cinemas and Fired Earth.

Schroder Ventures paid J Sainsbury GBP750 million for the Homebase business. However the financing package totals GBP1 billion, with the additional GBP250 million earmarked for transaction costs and to fund the future growth of the business. Equity was provided by Schroder Ventures’ funds, sale and leaseback financing was provided by J Sainsbury and UBS Warburg underwrote the debt facility. This was a lot of money to be looking for at a time when the debt market is reported by some to be getting tighter. As a consequence a portion of this debt was taken in the form of mezzanine financing.

The acquisition of Homebase was complicated by the fact that at the same time Homebase’s larger development sites were being sold to Kingfisher plc. There were 28 of these sites that had yet to open as Homebase stores.

Schroder Ventures is seeking a new chief executive for Homebase, after its incumbent managing director Kate Swann decided not to stay with the business. Charles Sherwood and Cheryl Potter of Schroder Ventures will join the board of Homebase.

Currently, Homebase has 12 per cent of the DIY and gardening market in the UK from its operation of 283 stores through which 17,000 people are employed on a full and part time basis.