Kingfisher sells store freeholds for £614m sterling

European retail group Kingfisher Plc moved a step nearer spinning off its Woolworths toys, sweets and household goods chain today with the sale of 182 high street stores for £614m sterling.

The portfolio, including 152 Woolworths outlets, will go to a partnership between London & Regional Properties and Goldman Sachs Whitehall Fund. The cash deal - at a £19m premium to the properties' book value - will halve Kingfisher's debt and give it more firepower for acquisitions.

Kingfisher's shares firmed by over 1%. They have fallen over 25% since the start of this year, pummelled by uncertainty over the disposal of Woolworths.

'The sale of these properties marks a further step towards completing the separation of the general merchandise division of Kingfisher,' Kingfisher said in a statement.

Its shareholders are due to vote on the Woolworths demerger later this month. Analysts said the way was now clear for Kingfisher to focus on its growing electricals and DIY business.

But analysts said the deal was not such good news for a demerged Woolworths, which looked to be saddled with a heavy rent burden.

A source close to the sale said Woolworths would lease back the stores over a 25-year period and stump up an annual rent increase of about 2.5% in the first five years.

'(This) places a significant liability on Woolworths from the start of its life as an independent company,' ABN AMRO analysts said, noting that average high-street rents had risen just 1.2% annually over the past 10 years.

'While Woolworths' cashflow should be sufficient to cover this liability, it may place a further strain on profitability.'

Earlier this month, Kingfisher finalised plans for Woolworths' independence. Brokers have valued the 800 store chain, the remainder of which are leased, at £400m to £500m, based on a price of 28-36 pence per share. The shares are due to start trading on August 28.

The retailer decided to spin off its general merchandise arm, which has been hit by intense competition from supermarkets, to focus on its higher growth home improvements and electricals businesses B&Q and Comet in the UK and Castorama and Darty in France.

Kingfisher sold Superdrug and related property for £310m sterling last month. Today's property deal includes 30 stores occupied by Superdrug and other tenants.