Health and beauty chain Boots is set to demerge its garage business Halfords.

Speculation had been growing in the City for some time that Nottingham-based Boots would spin out the car parts and bicycle chain, which it has always said was not a core part of the group.

But yesterday, Boots revealed for the first time that it will demerge the business.

The group had been considering selling Halfords, based in Redditch near Birmingham, but added that the most "appropriate" method was likely to be a demerger to shareholders.

Under the proposed deal, Boots' shareholders would receive shares in Halfords which would become an independent company listed on the London Stock Exchange.

Boots chief executive Steve Russell said: "Our focus is on growing our health and beauty business. "Halfords is an excellent company with a strong management team and a good record of profit growth. I am confident it will thrive as an independent company."

The group said Halfords' market-leading position and the success of the Arcade format meant it was now "well placed" to become an independent company.

Arcade was introduced in 1999 and includes "stores-within-stores" where possible, a second-floor dedicated to bicycles, and the introduction of designer car accessories.

Halfords has 400 stores, including 330 superstores located in edge-of-town sites or retail parks, 58 high street shops and 12 motorway outlets.

Four more stores are due to open this year, while 31 outlets are scheduled to be converted to Arcade formats by August.

Rob Scribbins, currently Halfords' managing director, will become chief executive of the independent business.

A spokesman said Boots was currently drawing up details of the demerger and would then present its plans to shareholders.

The split would make Boots, which acquired Halfords in 1989, a pure health and beauty group, covering retail, health services such as dental care, and the brands Strepsils, Clearasil and Nurofen.