Furniture retailer DFS has announced plans to take over rival chain Sofology in a deal worth £25 million.
DFS today confirmed it has exchanged contracts to acquire all the all the outstanding share capital of the specialist sofa retailer for an initial enterprise value of £25 million, on a debt-free cash-free basis.
The acquisition will see DFS take over Sofology’s chain of 37 stores across the UK, and the company said it already expects £4 million in annual savings as a result.
Sofology’s chief executive Jason Tyldesley and his management team are also expected to continue to lead the business once the acquisition is completed.
However, the deal still needs to be approved from the Competition and Markets Authority and the Financial Conduct Authority.
The deal comes after DFS warned in June that it had seen “significant declines in store footfall” due to a series of factors – namely the fall in consumer confidence and rise in inflation since the Brexit referendum and the recent General Election – which have led to a reduction in customer orders.
It’s also not the first time DFS has acquired retailers in the home and furniture sector, having taken over other rivals Dwell and Sofa Workshop in recent years.
Last year, Sofology posted £143 million in revenue but recorded a statutory loss before tax of £8.9 million.
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.”
N M Rothschild & Sons is acting as financial adviser to DFS. GCA Altium is acting as financial adviser to Sofology. Legal firm DWF advised Sofology on the transaction.