Permira's £900m Homebase surprise

ANYONE really wanting to wind up Charles Sherwood should ask him how many venture capitalists it takes to change a lightbulb after they take over a company.

The answer? None, because they've stripped out all the light bulbs.

OK, it's not particularly funny - but it is the cue for the usually affable chap to become enormously serious and describe in painstaking detail what value Permira adds to its acquisitions.

His buzzwords for it are 'impact investing'. 'We introduced some very important long-term measures to the Homebase business,' said Sherwood, 43. 'The one thing we didn't cut back was capital expenditure.'

That these changes nearly made the revamped Homebase unattractive to potential buyers is an irony not lost on Sherwood.

After the venture capitalists bought the company from Sainsbury last year, Sherwood and a new Homebase management team, led by chief executive Rob Templeman, ditched the strategy of moving into large DIY mega- stores and sold off a number of premises to B&Q.

'That did leave us with a lot of head-scratching about how to get out of it,' said Sherwood. 'We had got rid of the very parts of the business that would have attracted other DIY groups to make an acquisition.'

Selling off the large premises was part of a strategy to return to the core Homebase shopper - affluent women. Sherwood, along with the new Homebase board, concentrated on smaller stores with a mix of products for 'in front of the plasterboard rather than behind it'. Certain stores now display kitchen, bathroom and bedroom units.

The changes quickly drew the attention of GUS, until now known for its catalogue and financial businesses, and Permira was approached in spring.

The deal seems radical for GUS, but the plan to combine its Argos furniture and homewares business with Homebase to create a major force in retailing has been well received.

Though talks remained secret, the deal with GUS was not exclusive until early October. Until then Permira had been talking to three foreign DIY groups while continuing to explore options for a flotation.

But last week GUS announced the bid and Permira was thrown into the spotlight as it was revealed that it received an estimated £545 million from an outlay of £100 million.

'It has made me very proud,' said Sherwood. 'But we are not just in it for the money. It can be rewarding in other ways too. In the two years since we took over Homebase we've made a significant change in the business.'