By Lauren Mills
TROUBLED furniture company, MFI has appointed Dresdner Kleinwort Wasserstein, the investment bank, to auction its 200-strong chain of stores in a move to break up the group, which also owns Howden Joinery, the builders’ merchants.

A sale of the stores may lead to the disappearance of the famous MFI brand, which started in the 1960s making flat-packed furniture.

It provides confirmation of the revolutionary change sweeping through the retail sector, which is being forced to adapt to globalisation and cut-throat competition from more efficient competitors such as Ikea.
The decision to start a formal sales process comes just over a week after the group revealed it had received several bid approaches for all or part of its MFI furniture retail business. Interested parties include Swedish furniture group Nobia, which owns the Magnet kitchens business.
The South African-based Steinhoff Group, which has a 60% stake in the Homestyle furniture group, is also said to be interested. Homebase may also take a look at the business.
Dresdner started circulating sales documents last week in a bid to drum up interest in MFI’s high street and out-of-town furniture stores.
Analysts believe the retail division is in such a poor state of health that a “negative premium” will be attached to the sale of the business. This is exacerbated by MFI’s £150m (E216m, $277m) pension deficit, which may also be factored into any possible deal. In 2012 MFI made an operating loss of £85.1m.
Analysts believe that unless a buyer can find a way to reverse the slide, the name will be ditched for good.
Steve Davies, a retail analyst at Numis Securities, said: “It will come down to what [MFI] will have to pay someone to take it off their hands. If they could get rid of it for nothing, they’d jump at the chance.”
While this will be a hard pill to swallow, Davies believes it will be good for the company’s long-term health. “If they get out of retailing, they’d be re-rated,” he added.
As part of a restructuring announced in February, MFI also plans to sell its 29-store Sofa Workshop chain.It is likely that Matthew Ingle, who stepped up as chief executive of the group in October last year, after running Howden, would be relieved to be in charge of a smaller, yet improving company.
Since the start of 2013 trading has worsened at MFI, with orders down a massive 16%. By contrast, sales at Howden were ahead by a very respectable 8% on a same-store basis, which excludes the impact of new retail space.