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THE IKEA GROUP SOLD SUBSIDARIES FOR 5.2 BILLION €.
The IKEA Group said on Wednesday it had sold key subsidiaries for 5.2 billion euros ($5.58 billion) as part of an overhaul to help the furniture retailer react to new competition and shifts in consumer preferences away from its vast out-of-town stores.
The IKEA Group, which operates most IKEA stores, sold subsidiaries that manage the group’s supply chain and design, purchase and manufacture all IKEA furniture to Inter IKEA Holding BV, a company based in Delft in the Netherlands, which owns the IKEA brand. The transaction, initiated by Inter IKEA, helped to boost pre-tax profits by 23% to 5.4 billion euros at IKEA Group, which has its headquarters in Leiden in the Netherlands. Since September 1, Inter IKEA has controlled the development of the IKEA range and supply chain. This relegates IKEA Group to being a pure retailer, operating under a franchise agreement with Inter IKEA. Inter IKEA CEO Torbjorn Loof said Inter IKEA felt it was necessary to take full control of developing the IKEA business to respond to increased demands from customers to shop in city center stores, buy online and to use collection points. “The concept and the existing franchise system was made up in the beginning of the 1980s. It was another era,” he told Reuters. “The main aim is to make sure that we can grow and expand and be relevant to our customers,” he said. Inter IKEA announced its decision to exercise its rights to take back control of the design and other activities from IKEA Group last year but the price of this transaction was revealed for the first time on Wednesday when the two groups presented their earnings to August 31. The IKEA Group is owned by a Dutch Foundation while Inter IKEA is owned by a Liechtenstein foundation. The split of responsibilities aims to create a tension that spurs growth, Inter IKEA executives say. The overall structure, which is also tax efficient, was created by founder Ingvar Kamprad, a Swede, almost 40 years ago to allow IKEA preserve its independence in perpetuity. Profits of both groups are retained in the companies or foundations to fund the expansion of the IKEA concept. Sales from IKEA stores worldwide hit 36.4 billion euros last year, Inter IKEA said in its annual summary. IKEA Group accounted for 34.2 billion euros of this total. IKEA Group Chief Executive Peter Agnefjall said the transfer of key functions and 26,000 staff, would weigh on his company’s future profits, but would be offset by improvements in IKEA Group’s contracts with Inter IKEA. For more information:
