Sofology sold to rival retail chain
Sofology, the Wigan-based sofa retailer, has been sold to rival chain DFS for an initial enterprise value of £25m.
Further payments could be made a year after completion, based upon a multiple of seven times the underlying EBITDA generated by Sofology, up to a capped total of £105m.
Sofology has a network of 37 stores in the UK, as well as a strong web presence. It reported an EBITDA loss of £2.7m for the year to the end of December 2016 with statutory pre-tax losses of £8.9m on revenue of £143m.
This was blamed on the impact of exchange rates on cost of goods sold and disruption following the Sofology rebrand – two years ago, DFS won a court battle with Sofology, then named Sofaworks, over trademark infringement, forcing it to change its name. It had only just changed its brand from CSL in 2013, and took out a newspaper ad to announce the change and make a sly dig at then-rival DFS.
The Business Growth Fund had previously invested £10m in Sofology in March 2016 for a minority interest to support the company’s expansion plans.
The company has invested more than £5m in technology development over the last 18 months, including visualisation technology and personalised marketing content delivery, which DFS said could be shared across the group.
Doncaster-based DFS said the acquisition will further broaden its appeal to customers and add to its portfolio of strong furniture brands, which includes Dwell and Sofa Workshop.
Sofology chief executive Jason Tyldesley and his management team will continue to lead the business post completion and the company will retain its Golborne headquarters and maintain full control over its customer experience and customer facing activities.
DFS confirmed there would be no store closures as a result of the acquisition but it did say that it would create revenue synergies and allow for the better use of both companies’ warehouse facilities and delivery fleets.
Ian Filby, chief executive of DFS, 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 aquisition 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. Jason and his team should be congratulated for creating a fantastic and fast-growing business and I’m looking forward to working with Jason and the team as they continue to grow Sofology as part of the Group. ”
N M Rothschild & Sons is acting as financial adviser to DFS. GCA Altium is acting as financial advisors to Sofology.
