A deal could be struck by the end of this month, according to sources close to the situation.
Cerberus, named after the three-headed hellhound of Greek mythology, has invested in retailers including Boxclever and US department store group Mervyns. However, the acquisition of debt-burdened Focus would be its most ambitious UK retail deal to date.
Focus, backed by private equity houses Apax and Duke Street Capital, made pre-exceptional EBITDA of£43 million last year, but is labouring under a£280 million debt.
Barclays and ING, the retailer's bankers, and bondholders including Goldman Sachs, are likely to play a decisive role in whether a deal with Cerberus goes ahead.
One source said: 'Cerberus tends to deal in distress situations and when things are on the slide, the normal rules of deal-doing go out the window. Existing investors and the bankers will have to take a haircut.'
However, a source close to Focus denied that a deal with Cerberus was imminent and said the retailer's existing business plan runs until July.
One private equity source questioned whether a deal with Cerberus would be acceptable. He said: 'The state of the business is such that no financial buyer is going to offer a lot of money. The best hope is a trade buyer.'
He believed that Irish DIY group Grafton was best placed to take over Focus.
What role would be played by Focus founder Bill Archer in any deal remains unclear. There has been some speculation that he would align himself with Cerberus, but one source said the fund would prefer Archer to stand aside.
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