First round bids for Morrisons-owned maternity specialist Kiddicare are expected by the end of the month.
An information memorandum has been distributed and both trade and private equity buyers have expressed initial interest, it is understood.
A concern among potential buyers will be Kiddicare’s “huge liabilities” on its store estate, the source told Retail Week, and it is likely Morrisons will have to pay a dowry to any potential new owner.
Morrisons acquired Kiddicare as an etailer in 2011 but opened 10 stores for the brand in former Best Buy shops in primary pitches through a reverse premium deal in 2012.
Retail Week revealed last month that Morrisons had hired Rothschild to find a buyer for Kiddicare.
The embattled grocer in March said Kiddicare is “a business whose performance has been disappointing and which is no longer strategic” and revealed it had incurred a £163m charge on it.
However, many have laid the blame at Morrisons’ door for pursuing the controversial bricks and mortar strategy for Kiddicare. When Morrisons originally acquired Kiddicare it fought off competition from a raft of businesses that were thought to include Tesco, Amazon and Halfords.
The likely Kiddicare exit comes as Morrisons’ digital boss Simon Harrow resigns. Harrow, one of retail’s digital rising stars, rose through the ranks to become chief operating officer of Kiddicare before moving to Morrisons after the deal.
Morrisons boss Dalton Philips is aiming to turn around the ailing grocer by expanding into online and convenience, while lowering prices and selling off interests such as Kiddicare and a stake in New York-based food retailer Fresh Direct.
In March Morrisons reported pre-tax losses of £176m for the year to February 2, versus pre-tax profits of £879m the year before.
Morrisons could not be reached. Rothschild declined to comment.