Tesco said it sold Midlothian-based Dobbies Garden Centres to an investor group led by Midlothian Capital Partners and Hattington Capital for £217 million in cash.

Tesco bought Dobbies in 2007 and it has grown to become the UK’s second largest specialist garden centre retailer, operating 35 garden centres across Scotland, England and Northern Ireland.

Tesco chief executive Dave Lewis said: “Through their hard work and dedication to customer service, Dobbies colleagues have built a great business, and I would like to thank them for everything they have done. 

“It was a difficult decision to sell the business, but we believe this agreement will give Dobbies a bright future, while allowing our UK retail business to focus on its core strengths.”

Andrew Bracey of Midlothian Capital Partners and Barney Burgess of Hattington Capital said in a joint statement: “We are delighted to have been chosen by Tesco to take ownership of the Dobbies Garden Centres business. 

“It is a great business with fantastic colleagues. We’re very optimistic about the potential of the business, and we look forward to growing the business across the UK from its base in Scotland.” 

Tesco said that gross assets relating to Dobbies included in the Tesco accounts as at February 27 were £255 million.

It said Dobbies made a contribution of £17 million to Tesco’s reported profit before tax for the year ended February 27, 2016.

In a statement, Hattington Capital said Dobbies is being sold to a holding company controlled by Midlothian Capital Partners Limited, Hattington Capital LLP “and a number of additional equity investors that include family offices and individual investors.”

It said the group of buyers includes a number of highly experienced retail industry investors.

“The group that has acquired Dobbies will invest to secure the long-term growth of the business,” said Hattington. “It has committed to protect jobs, keep the head office in Scotland and grow the business throughout the UK from its base in Lasswade.”

Midlothian Capital’s Bracey said: “Dobbies is an iconic brand and we believe that Dobbies can be the market leader in the garden centre sector. It has a superior team that, with our long-term vision and capital, will grow this business across Britain.

“Together we have committed capital and expertise to drive the future growth of Dobbies. All of us are passionate about the custodianship of this business: Dobbies has found a good home with our group.”

Burgess of Hattington Capital added: “We inherit a strong company with some of the best stores in the industry and fantastic colleagues who, together with Tesco, have been good stewards of the Dobbies brand.

“The prospects for Dobbies are excellent: it has significant potential for growth in an under-served and under-developed sector. This is one of the most exciting opportunities in British retail.”

Bracey will be joined by Aidan Clegg and Neil Currie of Midlothian Capital, as well as Burgess and Frederick Goltz of Hattington Capital on the new Dobbies board.

The acquisition received financing from Ares Capital Partners.

The acquiring group was advised by Rothschild and Slaughter and May.