The sale of Kingfisher’s Castorama Italy business has been greeted with approval by the City.

The DIY giant has agreed to sell the underperforming business to French DIY retailer Groupe Adeo for !560 million (£443.9 million).

Castorama Italy represents about 3 per cent of Kingfisher’s group sales and recorded profits of£29 million in the year to February 2, down from£31 million the year before. The price represents 16 per cent of the group’s market capitalisation.

Kingfisher chief executive Ian Cheshire said that the sale price reflects the strategic value of Castorama Italy, but that the disposal formed part of his pledge to strengthen Kingfisher’s balance sheet by reducing debt.

The group’s share price rose 4 per cent on the news and Panmure Gordon analyst Philip Dorgan labelled it an “excellent deal”. Pali International analyst Nick Bubb called it a “very good price”.

Bubb added: “The£440 million disposal price is a lot higher than the£230 million we thought it was worth.”

The deal allowed the retailer to exit a non-core market while reducing its debt from£1.55 billion to about£1.1 billion.

“We felt like this was a good time to pay down some of our debt,” said Cheshire. “Italy is a structurally difficult place to get returns from. You have to throw a lot of money at it and it is difficult to get property.”

Kingfisher denied there are plans to shed any of its other international businesses.

“Our international business is an important part of our growth. Our Eastern European and Chinese businesses are a prominent part of our seven steps,” he said, referring to his turnaround strategy for the business. “But there are no sacred cows and we’ll continue to look at things carefully.”

Last week, Kingfisher posted a 1.5 per cent fall in second quarter like-for-like sales, but improved trading at its UK arm, reporting a 0.5 per cent fall in like-for-likes – up on the 7.9 per cent first quarter decline.