Kesa Electricals, owner of the Comet electricals chain, is set to gain £400 million from the sale of its French furniture business after entering “exclusive talks” with a private equity consortium.

The sale of BUT, which runs 240 stores across France, looks certain to be completed early next year, allowing Kesa to focus on reviving Comet and Darty, its French electricals operation.

Merchant Equity Partners (MEP), the turnaround specialist, is leading the consortium, which includes Goldman Sachs and Colony Capital.

MEP, set up by Henry Jackson, the former Deutsche Bank investment banker, has been planning to pick up assets across Europe after its £1 acquisition of MFI in Britain last year. It is one of a dozen potential bidders thought to have submitted preliminary offers during Kesa’s auction process in the summer.

Rivals were understood to include Steinhoff, the South African company that owns a number of brands including Harveys, the British furniture retailer.

In a short statement yesterday, Kesa said that it had entered exclusive talks with MEP, Colony and Goldmans about the possible sale of BUT for €550 million (£401 million).

The price is at the lower end of the €500 million-to-€800 million range that was rumoured six months ago.

Yesterday’s announcement means that MEP and its partners are almost certain to be unveiled as the new owners if French trade unions back the deal. Discussions with union leaders began yesterday.

Kesa said that its negotiations with the consortium “include consultations as well as obtaining regulatory approvals and are likely to be completed in the coming months”.

Shares in Kesa ended the day up 11¼p at 234p.

Analysts have long questioned BUT’s place in Kesa’s strategy, because the company predominantly sells electricals and white goods. Kingfisher, the DIY retailer that owned Kesa until 2003, tried and failed to auction BUT in 2002.

BUT used to be the undisputed market leader in France, but, despite a brief recovery in the past year, it has struggled to compete with Ikea and Conforama, a French-owned retailer of home appliances and furnishings.

BUT management has spent the past decade trying to take back control of the estate from franchisees. and now directly controls half the 240 stores. The company generates a quarter of Kesa’s revenue and achieved profits of £36.1 million in the year to January 31 on sales of £595.7 million.

MEP has tried to distance itself from the row over private equity firms taking over public companies by emphasising its focus on turning around businesses through improving core operations rather than stripping out cost.

MFI achieved its first like-for-like growth in three years in the January sales at the start of 2007. MEP recently announced an investment of £125 million in the business, including a new distribution centre in Thorne, Yorkshire, which created 330 jobs.

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