10:33 pm - February 12, 2025
The retail industry is abuzz with excitement as a dramatic late-stage acquisition bid has emerged, reshaping the fate of The Original Factory Shop (TOFS), a beloved discount retail chain in the UK. According to Sky News, Modella Capital, a private equity firm with a keen eye for strategic investments, has made a last-minute move to acquire TOFS after negotiations with a rival bidder, believed to be Baaj Capital, stalled at the eleventh hour. This sudden twist in the saga has left industry insiders and stakeholders on the edge of their seats, as the deal could potentially be finalized within days. If successful, this acquisition would mark the end of an era for TOFS, which has been under the ownership of Duke Street, another private equity firm, for over 17 years.
TOFS, a household name in UK retail, operates more than 180 stores across the country, offering a wide range of products at discounted prices. Established in 1969, the chain has built a loyal customer base by providing affordable access to top-tier brands such as L’Oreal, Adidas, and Black & Decker. Over the years, TOFS has carved out a niche for itself as a go-to destination for budget-conscious shoppers seeking quality products. The chain’s resilience was further tested during the COVID-19 pandemic, when Duke Street, its current owner, injected over £10 million to support the business through one of the most challenging periods in retail history. Today, TOFS is debt-free, making it an attractive target for potential buyers looking to capitalize on its strong market position.
Modella Capital, the firm leading the charge to acquire TOFS, has been actively expanding its retail portfolio in recent weeks. In addition to its interest in TOFS, the company has also been pursuing a deal to buy WH Smith’s high street stores, signaling its ambitious plans to strengthen its foothold in the UK retail sector. Modella’s approach to acquisitions is often characterized by its focus on solvent deals, ensuring that the businesses it acquires are financially stable and poised for growth. If Modella succeeds in acquiring TOFS, it would not only gain control of a well-established retail chain but also inherit a loyal customer base and a network of strategically located stores.
The bidding war for TOFS has been intense, with several high-profile competitors vying for control of the chain. Rival bidders are reported to include Frasers Group, owned by billionaire Mike Ashley, and Poundstretcher, a discount retailer backed by the investment group Fortress. Frasers Group, known for its ownership of brands like House of Fraser and Sports Direct, has been on an acquisition spree in recent years, snapping up struggling retailers to expand its portfolio. Poundstretcher, on the other hand, has been focusing on consolidating its position in the discount retail market, making TOFS a strategic fit for its growth plans. The interest from these prominent players underscores the value and potential of TOFS as a retail asset.
Despite the intense competition, Modella Capital appears to be in the driver’s seat, with industry sources suggesting that its solvent deal is likely to trump other offers. The company’s willingness to engage in a solvent deal, which ensures that TOFS’s existing liabilities are adequately addressed, is seen as a key factor in its favor. This approach not only safeguards the interests of TOFS’s employees and suppliers but also provides a clean slate for the new owner to implement its growth strategy. With the deal reportedly nearing completion, Duke Street, the current owner of TOFS, is poised to exit the business after nearly two decades of ownership.
The acquisition of TOFS by Modella Capital would represent a significant turning point for the retail chain, marking the beginning of a new chapter in its 54-year history. As the retail landscape continues to evolve, the success of this deal will depend on Modella’s ability to build on TOFS’s existing strengths while adapting to changing consumer preferences and market dynamics. For now, the industry waits with bated breath as the final details of the acquisition are ironed out, knowing that the outcome will have far-reaching implications for TOFS, its employees, and its customers.