13 March 2019 02:00
Mothercare has agreed the sale of its Early Learning Centre (ELC) brand to the owner of The Entertainer toy shop chain for up to £13.5m. The struggling retailer, which was forced to strike a rescue deal with creditors as part of restructuring and refinancing last year, said the proposed disposal would bolster its ambition to be free of bank debt by the end of this year. Mothercare said it did the deal with TEAL Brands because it did not have "the necessary capital, resources or scale" to continue to invest and develop own‑brand ELC toys. The company told investors £6m would be received on completion of the deal, with up to £5.5m in respect of inventory - stock - due within a few months of completion and a further £2m in so-called earn out fees over the next two years. It added that it would continue to hold approximately £6m of stock for sale in the short term and retain an "arm's length" concession deal with The Entertainer for the supply of toys to its stores, where ELC trade from, and online.
Shares rose 5% in early deals. Mothercare said its transformation plans, aimed at cutting costs, were on track with the business due to trade from only 80 stores in its core UK market by the end of this month. It had 137 last May when it secured a Company Voluntary Arrangement to avert collapse and trading has remained tough since. ELC operates within all Mothercare shops in the UK, in 400 stores internationally via franchise partners and online. Chief executive Mark Newton-Jones said: "This disposal of Early Learning Centre provides a further step towards eliminating our bank debt, and our new concession arrangements with The Entertainer will bring our customers an even stronger toys offer, both in stores and online. "We look forward to working with the team at The Entertainer in the years to come." The Entertainer said the acquisition would build on its growth since the collapse of Toys R Us. Founder and executive chairman, Gary Grant, said: "We are delighted to add ELC to The Entertainer family. "It comes with a rich history as a much-loved British brand, supporting parents and grandparents with their children's early years' learning, development and play. "We will look to bring new life to the product offering whilst maintaining the high level of quality ELC is renowned for." Keep abreast of significant corporate, financial and political developments around the world. Stay informed and spot emerging risks and opportunities with independent global reporting, expert commentary and analysis you can trust. The group said it had agreed the deal for up to £13.5 million in a move to help slash its debt pile. The Early Learning Centre (ELC) is run within 80 Mothercare stores in the UK, 400 stores internationally via franchise partners, and online. The acquisition also includes ELC's portfolio of toy brands, such as Happyland. But Mothercare will retain around £6 million of Early Learning Centre stock to sell down. It said the move will help it pay off around £17.5 million of debt over the next year, while it has also struck an "arm's length" concession deal with The Entertainer for the supply of toys to stores and online. Troubled retailer Mothercare is selling its Early Learning Centre business to toy chain The Entertainer as it ramps up turnaround efforts. Mothercare – which is overhauling the business to boost its flagging fortunes – added that its swingeing store closure plan was ahead of schedule, with 57 stores set to shut by the end of March, taking its estate down to 80 from 137 last May. Chief executive Mark Newton-Jones said: "We have made significant progress in recent months as we continue our strategic transformation to deliver a sustainable and profitable future for Mothercare. "This disposal of Early Learning Centre provides a further step towards eliminating our bank debt, and our new concession arrangements with The Entertainer will bring our customers an even stronger toys offer, both in stores and online." The group said the ELC deal comes as it lacks the scale and resources to develop the toy ranges, amid an "intensely competitive" market. Gary Grant, founder and executive chairman of The Entertainer, said the firm would look to "bring new life" to the ELC brand. He added: "By combining our experience with that of ELC's passionate and capable partners around the world we look forward to re-invigorating the brand for generations to come." (Reuters) - British baby products retailer Mothercare plc said on Tuesday it plans to sell its educational toy brand to Teal Brands Ltd for 13.5 million pounds ($17.85 million) as it looks to cut debt. The proposed sale of Early Learning Centre Ltd also includes some related assets. Proceeds from the transactions will be used to cut debt by about 17.5 million pounds over the next year. The company, which is shutting over a third of its UK stores amid pressure from online and discount players, also said it was aiming to be debt free by the end of this year. (Reporting by Pushkala Aripaka in Bengaluru) Sterling climbed by more than 2 per cent to reach $1.3290 on Monday evening as Theresa May said she'd agreed 'legally binding' alterations to her deal. The currency will remain volatile throughout the next few days, with MP's due to vote on the deal this evening. Elsewhere, 'growing pains' in Domino's Pizza's international business' has taken a 22 per cent bite out of the firm's profits, and rattled retailer Mothercare is selling its Early Learning Centre business to The Entertainer in an effort to slash its debt pile.