MFI saved by management buy-out

The future of furniture giant MFI has been safeguarded by a management buy-out, the firm's chief executive said tonight.

Gary Favell said the deal means the firm can continue to trade as normal.

The deal has been agreed and the buy-out will be complete within 24 hours, he added.

"I am delighted that we have secured the future of the MFI business through this management buy-out and have the capital to provide continuity and security for our customers, who continue to support MFI as the largest fitted furniture business in the UK," Mr Favell said.

"MFI is a fantastic business, and with the large amounts of capital injected over the last two years, we have worked hard to improve service levels and the retail experience for our customers.

"In Hygena and Schreiber we have two of the strongest brands in the UK furniture market. Our new Küchen Lab brand is growing fast, taking market share from our competitors and our distribution centre at Thorne is best-in-class.

"We have many plans to further improve the business - including discussions with a number of major UK retailers to increase the number and quality of concession partnerships within our stores.

"Fundamentally, it is business as usual for MFI, its employees and customers. In fact, sales in recent weeks have been ahead of plan. MFI is a great retail brand and I look forward to leading the management team as we build further on our market leading position."

Today's agreement follows several days of discussions between the management team and MFI's owner Merchant Equity Partners (MEP).

The statement from the management team said the buy-out will secure the business's future and protect employees.

It added that all customer orders will continue to be fulfilled and trading will continue as normal.

The statement said the buy-out will be funded through "a substantial cash dowry payment from MEP which will secure deposits paid by customers".

But it added that MEP would not remain a shareholder following the transaction.

MFI, which has its headquarters in north London, has around 2,500 staff and 192 stores.

One of the UK's best known retail brands, MFI established itself as a major player in home furnishing shortly after it was founded in 1964 by Noel Lister and Donald Searle, who called it Mulland Furniture Industries after Searle's wife's maiden name.

It started out as a mail order business but three years later opened its first shop, in Balham, south London.

During the next 30 years it became the biggest furniture retailer in the UK with a value of £1bn (€1.26bn).

But its position as market leader was hit by the growth of stores such as Ikea, B&Q and Homebase, causing sales to fall from £854m (€1bn) in 2003 to £742m (€935.5m) in 2005.

Confidence in the brand was also damaged by supply chain problems which caused delays and errors to customers' orders.

MFI, which was bought by MEP for £1 (€1.26) in 2006, has been hit by a sharp fall in demand for big-ticket goods and faces a quarterly rent bill tomorrow.