Lakeland becomes latest acquisition target for Modella Capital

According to Sky News, Modella is among a small number of parties competing to acquire a controlling stake in the homeware retailer. 

The sale process, which began in January, has also attracted interest from Hilco, former owner of HMV. According to the report, retail industry sources indicate that Lakeland, controlled by founder Alan Rayner’s three sons, is seeking new funding in the tens of millions of pounds as it faces financial challenges, including the upcoming increase in national insurance contributions.

Founded in 1964 as Lakeland Plastics, the company employs approximately 1,000 people across nearly 60 stores, its Windermere headquarters, and distribution centers.

Sky News previously reported that Lakeland had appointed Teneo as financial advisers, while PricewaterhouseCoopers is advising HSBC, Lakeland’s main lender.

Modella Capital’s interest in Lakeland comes as it explores cost-cutting measures at both Hobbycraft and The Original Factory Shop. Modella is also bidding for WHSmith’s high street retail division and may consider Poundland, which Pepco is exploring selling.

In January, a Lakeland spokesperson stated the company was “considering a number of options to ensure a sustainable and long-term capital structure” that builds on its “60-year heritage as one of the UK’s most innovative homeware retailers.”

According to Companies House filings for 2023, Lakeland faced “the most challenging economic conditions for several decades”, with high inflation reducing demand for many traditional product categories. Sales remained relatively stable at £153m, though auditors noted “material uncertainty” about the company’s ability to continue operations.

The company recently renewed its banking facilities with HSBC, securing a £7.5m revolving credit facility expiring in 2028, and a £10m trade finance facility.

Both Modella and Hilco declined to comment, according to the report.