Focus DIY, the UK’s third largest home improvement retailer, today said that it was in rescue sale talks with the US private equity firm and specialist in distressed debt Cerberus.

Cerberus is offering less than the total value of the group's net debt of £300 million, meaning that holders of bonds with a face value of £100 million, including Goldman Sachs, will collect just 40p in the pound or £40 million.

Focus DIY's owners, the founding chairman Bill Archer with 11.5 percent, the private equity firm Apax, with 30 per cent, and Duke Street Capital, with 43 per cent, are expected to collect nothing for their shares but Duke Street has already profited from its initial purchase by taking cash out and loading the company up with more debt.

Focus fell victim to the slide in the DIY market which struck two years ago and struggled to recover. Its problems were made worse by the high interest it was having to pay on its heavy debts.

Apax and Duke Street brought in NM Rothschild in January to try to find a rescue buyer.

Accounts for the year to the end of October 2006 showed Focus had £280 million of debt of which £180 million was bank borrowings and £100 million came from bonds.

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