Lakeland, the family-owned homewares retailer, has become the latest takeover target for an investment vehicle which has rapidly become one of the industry’s most acquisitive investors.
Sky News has learnt that Modella Capital, owner of Hobbycraft and The Original Factory Shop, is among a small number of parties vying to acquire a controlling stake in Lakeland.
A sale process, which kicked off in January, has also drawn interest from Hilco, the former owner of HMV, retail industry sources said.
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Lakeland, which is controlled by the three sons of founder Alan Rayner, is understood to be seeking new funding running to tens of millions of pounds as it faces headwinds including the imminent hike to its national insurance bill.
Established in 1964 as Lakeland Plastics, the company employs roughly 1,000 people across a chain of nearly 60 stores, at its head office in Windermere and its distribution centres.
Sky News revealed in January that it had hired Teneo as financial advisers.
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At least one other bidder is understood to remain in the process.
PricewaterhouseCoopers, the accountancy firm, is advising HSBC, Lakeland’s principal lender.
Modella’s interest in buying Lakeland comes as it explores cost-cutting and restructuring options at both Hobbycraft and The Original Factory Shop.
It is also one of two remaining bidders for WH Smith’s high street retail arm.
Pepco’s decision to explore a sale of Poundland may also draw interest from Modella.
The increase in employers’ national insurance, which comes into effect early next month, has provoked protest from retailers and hospitality businesses, with industry bodies warning that the changes will be a tipping point for many employers.
J Sainsbury, the supermarket giant, plans to axe 3,000 jobs as part of an transformation programme accelerated in part because of its growing cost base, while the chairman of JD Sports Fashion and the British Retail Consortium said this week that “every retailer” was looking at cost-cutting options.
A Lakeland spokesperson said in January that it was “considering a number of options to ensure a sustainable and long-term capital structure, which builds on our sixty-year heritage as one of the UK’s most innovative homeware retailers”.
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Lakeland was founded when Mr Rayner began selling plastic bags for home freezing from his family garage in the Lake District.
It now sells more than 4,000 home and kitchen products.
Accounts filed at Companies House for 2023 warned that it entered that year “facing the most challenging economic conditions for several decades with high inflation leading to falls in demand for many traditional categories”.
Sales during the year were broadly flat at £153m, with Lakeland’s auditors warning of a “material uncertainty…[about] the company’s ability to continue as a going concern”.
The accounts added that it completed the renewal of its banking facilities with HSBC after the year-end, comprising a £7.5m revolving credit facility expiring in May 2028 and £10m trade finance facility.
Modella and Hilco declined to comment.
