By  on December 9, 2010

PARIS — French retail-to-luxury group PPR said it has entered into exclusive negotiations with South Africa’s Steinhoff International Holding Ltd. for the sale of furniture chain Conforama for 1.2 billion euros, or $1.58 billion at current exchange.

Under the terms of the deal, Steinhoff would also take over Conforama’s debt to PPR, an undisclosed sum.

“This planned cession to a global furniture sector player is a major strategic opportunity for Conforama,” PPR chairman and chief executive officer François-Henri Pinault stated. “Steinhoff International has an intimate understanding of Conforama’s business and the two companies operate in complementary markets.”

PPR has said it wants to sell its retail assets, including music, books and electronics retailer Fnac, in order to fund expansion in the lifestyle segment, which should eventually dwarf its luxury division, Gucci Group.

With 41,000 employees, Steinhoff is already one of the largest furniture and household goods suppliers in Europe and had been looking to reinforce its position in France and other territories.

Natixis analyst Boris Bourdet estimated Conforama’s debt at roughly 400 million euros, or $529 million, which would bring the total purchase price to around 1.6 billion euros, or $2.12 billion.

PPR chief financial officer Jean-François Palus declined to put a total value on the deal, but said the group was fully satisfied with the offer. “It is above the figures that have been quoted here and there,” he said on a conference call.

Conforama posted sales of 821.2 million euros, or $1.06 billion, in the third quarter of 2010, bringing year-to-date sales to 2.23 billion euros, or $2.94 billion, up 7.5 percent versus 2009. Dollar rates are calculated at average exchange rates for the period in question.

The furniture chain operates 241 stores, of which 190 are in France and the remainder in Italy, Spain, Switzerland, Croatia, Portugal and Luxembourg.

The transaction is expected to be finalized in the next few weeks, after consultations with employee representatives. It will be subject to approval by the general assembly of Steinhoff International and competition authorities.

Other bidders reportedly included private equity firm Carlyle, and a consortium linking Goldman Sachs and Colony Capital, owners of the French furniture chain But, and London-based investment fund Permira, which owns Valentino.

PPR has declined to comment on details of the bidding process.

News of the impending sale fueled renewed speculation that Pinault was interested in buying Californian outdoor sports lifestyle brand Quiksilver. A PPR spokeswoman declined to comment on a report in French financial daily La Tribune stating that PPR had contacted Quiksilver ceo Bob McKnight and private equity firm Rhone Capital, which owns roughly a fifth of the company.

“PPR will take the time to make a purchase in the best conditions just as it is taking the time to make a sale in the best conditions,” she said.

Officials at Rhone Capital declined all comment.

Shares in PPR closed down 1.7 percent at 124.80 euros, or $165.19, on the Paris stock exchange.

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