Retail giant Kingfisher has launched a financial overhaul paving the way for a full takeover of its French DIY subsidiary Castorama.

Under the plan, Kingfisher will issue new shares worth �2bn in order to help fund the purchase of the 45% stake in Castorama that it does not already own.

The company said on Wednesday that it planned to offer �3.2bn for the outstanding Castorama stock.

The deal is aimed at consolidating Kingfisher's DIY operations, which also include the B&Q chain in the UK.

At present, Kingfisher does not have full management control over Castorama despite owning 55% of its shares.

Electrical goods split

Kingfisher said it also planned to set up a separate company to run its electrical goods retail business, which includes the UK's Comet chain and Darty in France.

"The moves announced today are designed to capture the full potential of our Group and so enhance value for our shareholders," said Kingfisher chairman Francis MacKay.

Kingfisher added that it had started looking for a successor to its chief executive Sir Geoff Mulcahy, who has been in the job for 20 years.

The overhaul is designed to restore investor confidence in the company, battered by the underperformance of Castorama relative to B&Q.

Kingfisher's own share price has lagged that of other major British retailers in recent months, despite a sustained boom in property prices and consumer spending.

The company's stock edged slightly lower in early trade on Wednesday in response to the new share issue, falling 3p to 382p.