MFI has closed 13 sites since the start of 2006

Under the deal, Merchant Equity Partners (MEP) will take control of the 200-store chain while MFI will continue to supply the stores.

MFI said it planned to change the name of the rest of the group to Galiform.

The company will hold an extraordinary meeting in October to vote on the sale, which is expected be to completed later in the month.

MFI said it would pay MEP £53.1m next year and £12m in 2008 if the new owners match the investment.

Chief executive Matthew Ingle said the group had explored various options for the retail business, but had decided a sale was in the best interests of shareholders.

New focus

The deal will leave MFI able to concentrate on its profitable Howden Joinery trade business and its loss-making furniture manufacturing operation.

Howden made a profit of £51m in the first six months of the year. Its earnings have helped to offset problems with the group's other businesses in recent years.

The company hopes to expand the 320-strong chain of Howden depots to 500 by 2010.

MFI's manufacturing operations are struggling, losing £25m in the six months to 10 June.

It has closed a number of UK factories as it looks to source more products from overseas.