UPDATED: ScS-owner Sun European last night acquired beds giant Dreams in a pre-pack administration deal for £35m, Retail Week has learned.
Sun European has taken 171 stores, shuttering 93, as tipped by Retail-Week on Tuesday, as the private equity firm aims to turn around the beds retailer, which had overexpanded under previous owners Exponent.
Ernst & Young, which was hired to handle the Dreams sale process in December, was appointed administrator yesterday immediately before Sun European acquired the business. Ernst & Young confirmed the pre-pack administration deal in a statement on Wednesday morning.
The 93 store closures puts 350 jobs at risk.
The current management team, led by chief executive Nick Worthington, is to be kept on. The former boss of Tesco’s US business Tim Mason is in advanced talks to join Sun European as its operating managing director.
Worthington told Retail Week: “The management of this business has spent the best part of 18 months focusing on keeping this business’ head above water. We can now focus on investment. We’ve got no debt and 171 profitable stores. The business couldn’t be better placed.”
He added: “I’m disappointed and saddened we’ll lose some store colleagues, but every effort will be made to accommodate those affected where possible.”
Sun European has beaten off stiff competition from Dreams founder Mike Clare, who wanted to revitalise the business he sold almost five years ago to the day for £220m.
Sun European vice president Jordan Wadsworth said: “Dreams is a well-recognised brand known for its wide product range of beds, headboards, mattresses and associated products. Despite operating with an over-expanded store base and significant debt in the precarious economic climate of recent years, the business remains the market leader and, with our support, is now well positioned to capitalise on future opportunities.”
Clare’s offer was backed by Apollo Management, which acquired jewellery group Aurum in December. It is thought retail veteran and former Debenhams chief executive Rob Templeman was being lined up to help Clare turn around the business.
A spokesperson said Clare was was “disappointed to have not bought Dreams back but is not giving up”.
The spokesperson added: “He already has advanced plans to save jobs and rescue the stores that will be closed by Sun (and possibly others) in a new radical bed retailing venture. Many staff and suppliers remain loyal to Mike and he already owns the Dreams head office.”
Sir Philip Green and the private equity arm of RBS also lodged first round bids but did not enter into the second round.
The Dreams sale was initiated after a prolonged period of uncertainty during which time the retailer’s owners Exponent and its banks, led by RBS, were unable to agree on a strategy.
Dreams like-for-likes increased 7.2% in the four weeks to January 7 after a £3m investment in its multichannel platform and store estate last year, as well as a focus on improving ranges and lowering prices.
However, in the most recent set of company accounts Dreams reported an EBITDA fall to £11.2m from £25.1m in the year to December 24, 2010. Turnover grew 7% to £300m.