Hunter gears up for exit after offloading d2 chain

Sir Tom Hunter is to divest his small retail holdings after selling young fashion chain d2 this week.

The Scottish entrepreneur is understood to be seeking a buyer for his loss-making Qube footwear chain, as he slims down his West Coast Capital retail portfolio to focus on larger retail investments and international opportunities.

Sources in the market said Hunter would retain USC and Office for the short term, but added that this was purely because of market conditions and sustained losses at USC.

One source close to the company said the lower valuations on private equity deals in the current climate meant Hunter was playing a waiting game to maximise his return on Office.

He added: "Tom paid about £40m for USC – he would have to take a hit to sell before USC is turned around and that would be a blow to his credibility. It's five years since he bought Office. You have to remember that West Coast Capital is a typical private equity firm looking for short- to medium-term exits, so it is time for Tom to look at selling his interests now."

A second source close to Hunter said a deal to offload Qube was two to three months away. It is unclear if a buyer is already waiting in the wings, but supplier sources told Drapers that JJB Sports chief executive Chris Ronnie had assessed the chain before Christmas.

Speaking about the sale of d2, Hunter said in a statement: "This is really part of a de-cluttering strategy. Our business is now largely focused on sizeable retail investments such as House of Fraser."

The MBO of d2 was led by managing director Alan Kinney and USC chief executive Jim McGonigle. A spokesman denied the chain had been sold for £1, saying the deal was worth in the high single-digit millions.

McGonigle's involvement has raised eyebrows in the sector, with rival retailers questioning whether there would be a conflict of interest between his roles at d2 and USC but he will be a silent partner at d2.

The d2 chain posted the first loss in its six-year history for the year to January 31 2007. Sales were flat at £50 million for the period, while pre-tax losses hit £1.7m compared with a pre-tax profit of £1.4m the year before.