Morrisons drafts in Rothschild to sell Kiddicare

The grocer revealed last week it wanted to offload the business, along with its stake in US online grocery firm Fresh Direct, as part of a colossal restructure of the grocer.

An information memorandum is expected to be issued as early as next week and there has already been “significant interest” from private equity houses and trade buyers, sources told Retail Week.

It has been suggested Morrisons may have to pay a dowry to any potential new owner.

However, it is understood that Tesco, which was thought to be in the running to buy the business when Morrisons bought it in 2011 for £70m, has ruled itself out.

It is thought some prospective buyers have been put off by Kiddicare’s store base. Morrisons acquired Kiddicare as a pureplay etailer, but opened 10 stores in 2012 in former Best Buy shops.

One source who is planning to cast his slide rule over Kiddicare said that financially the retailer is a “disaster” and that some may be put off because it is “bleeding money”. The source said that Morrisons’ decision to open stores was a mistake. “That’s what’s killed it,” the source said.

Morrisons said last week Kiddicare is “a business whose performance has been disappointing and which is no longer strategic”. 

Kiddicare’s former owner, Scott Weavers-Wright, who sold to Morrisons, told Retail Week last week that he was disappointed by the state of the business.

Last week Morrisons revealed it had incurred a £163m charge on Kiddicare when it revealed its full year figures. The retailer reported pre-tax losses of £176m for the year to February 2, against pre-tax profits of £879m the year before.

The grocer also said it expects underlying profits in 2014/15 to be in the range of £325m to £375m, less than half the underlying profit it achieved last year, which came in at £785m.

Morrisons declined to comment. Rothschild could not be reached.