Debenhams poised for flotation - report
Department store Debenhams was today reported to be finalising plans for a £3bn (€4.3bn) flotation and will launch on the London Stock Exchange as soon as next month.
Debenhams will make the move in spite of fears that the tough conditions in the retail sector may hurt interest in its shares, according to the Financial Sunday Express.
It is thought the strength of the stock market has tempted its private equity owners to pursue a flotation, with the FTSE 100 Index recently hitting a five-year high above the 6000 mark.
Speculation that Debenhams was mulling a flotation started swirling around the City in January when it appointed investment banks to advise it on its options. A spokesman for Debenhams declined to comment on today’s report.
The current owners of the business – private equity groups Texas Pacific, CVC Capital and Merrill Lynch Private Equity – invested £600m of equity in 2003 when they outbid Permira with a deal worth £1.9bn, including debt.
It is believed that the trio has received capital repayments of about £1.3bn from Debenhams since then – more than twice the investment.
The rewards were secured after chief executive Rob Templeman made the company’s operations more efficient, embarked on an aggressive store opening programme and used debt to improve investor returns.
Sales broke through the £2bn barrier for the first time in the year to September 3 while pre-tax profits soared to £238.6m compared with £107m a year earlier.
A flotation price of £3bn for Debenhams would put it on the same sales multiple as Next trades on – increasing the total take-out from the business to around four times the original investment when debt is excluded.
Despite high street retailers ranging from Next to Woolworths playing down the chances of a recovery in consumer confidence over the next 12 months, today’s report quoted bankers as saying that the strong performance of Debenhams and rivals such as Marks & Spencer would underpin its valuation in the City.
