• Sofology has 37 stores and trades online
  • Deal will be earnings accretive in first full year
  • Sofology’s management team will stay

DFS is to buy specialist sofa competitor Sofology in a deal valued at £25m.

DFS said that the acquisition would broaden its appeal to customers “through Sofology’s distinctive consumer proposition”.

Sofology has 37 stores and sells online.

DFS said the deal, valuing Sofology at £25m on an enterprise basis, should be earnings accretive in the first full year following acquisition, “with material medium- to longer-term value creation expected”.

The purchase should “further broaden the group’s appeal to customers, through Sofology’s distinctive consumer proposition, and as part of the group’s portfolio of strong furniture brands”.

Sofology chief executive Jason Tyldesley and the incumbent management team will stay to run the retailer after the deal with DFS is completed.

DFS chief executive Ian Filby said: “While the UK furniture retail market continues to be very challenging, we remain focused on making strategic progress to strengthen our position in living room furniture.

“This acquisition represents a clear opportunity for DFS to accelerate our proven strategy of broadening our appeal, generating substantial long-term returns for shareholders underpinned by well-understood synergies.

“Sofology’s distinctive market position is a good fit with our existing brands. Jason and his team should be congratulated for creating a fantastic and fast-growing business and I’m looking forward to working with Jason and the team as they continue to grow Sofology as part of the group. ”

In its last financial year Sofology generated sales of £143 million. It made an EBITDA loss of £2.7m and a pre-tax loss of £8.9m, partly reflecting the effect of exchange rates on the cost of goods sold, and disruption following rebranding.

DFS’ acquisition of Sofology is subject to regulatory approval.

DFS has also agreed a refinancing of its existing borrowings, retaining its total facility size and covenants, but on a new, lower-cost, five-year £230 million revolving credit facility.