Exclusive: Apollo Backs Dreams Founder Bid

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The buyout firm Apollo Management is backing an attempt by the founder of Dreams to buy back one of Britain's biggest beds retailers.

I understand that Apollo and Mike Clare are today submitting a joint bid for Dreams, which has been put up for sale by its lenders, who are led by the state-backed Royal Bank of Scotland (LSE: RBS.L - news) (RBS).

Apollo, which has a reputation as an aggressive acquirer of struggling businesses and bought a chunk of HMV's debt shortly before it collapsed into administration last month, is among a pack of private equity firms looking at Dreams.

It already has a significant presence on the UK high street through its ownership of companies such as Aurum Holdings, the parent of Goldsmiths and Mappin & Webb, the jewellery chains.

Apollo's bid for Dreams suggests that it has faith that big high street chains can survive in spite of a weak economy and rising overheads such as rent costs.

Mr Clare relinquished control of Dreams, which operates about 270 stores, in 2008 when he sold out to Exponent Private Equity, another investment firm, for more than £200m.

The founder continues to have a financial exposure to the company and is keen to be part of a resolution to the impasse over its ownership.

Dreams is trading well despite its heavily-indebted financial position. Like-for-like sales during the pre-Christmas and new year trading period increased by more than 7%, the company said last month.

Mr Clare is also understood to have held talks with GSO, a financing house owned by Blackstone (NYSE: BX - news) , the US buyout firm, about backing his bid.

Ernst & Young, the accountancy firm, is handling the auction on behalf of Dreams' lenders. It is trying to tie up a deal by the middle of March, shortly before an extension to the waiver of the chain's borrowing terms with its lenders expires.

Roughly eight parties are expected to have submitted bids by the deadline on Friday. These are likely to include HIG Europe, owner of the mattresses manufacturer Silentnight, Sun Capital, owner of the ScS Upholstery sofa chain, and Endless, a specialist investor in distressed retailers.

Apollo could not be reached for comment, while Mr Clare and Dreams declined to comment.