Investors cautious on Debenhams return
Debenhams shares were priced at the bottom end of expectations today as the retailer returned to the market after an absence of more than two years.
The stock began trading at 195p – giving Debenhams a market value of £1.67bn (€2.4bn) – before moving to 201p as investors gave the chain a cautious welcome following its delisting in a private equity takeover in late 2003.
When Debenhams announced plans to float last month, it said the shares would be priced in a range between 195p and 250p.
Since buying the business, the owners of Debenhams are thought to have secured up to four times their investment after carrying out a refinancing and leading an improvement in trading at the 123-strong store chain.
As a result of the changes, Debenhams returned to the stock market today with much higher debt of £1.2bn (€1.75bn).
Analysts expressed concern in the run up to the flotation that the returns generated by the private equity owners would leave little value in the business, particularly at a time of slowing sales growth.
David Buik of Cantor Index said: “An issue price of 195p suggests that there has been a lack of enthusiasm to subscribe for this stock.
“With the retail market remaining tough in the high street, many private investors believe there may be more fertile sectors to invest in for the next few weeks, despite some positive credentials offered by Debenhams and its advisers.”
The private equity owners, including Texas Pacific and CVC, have reduced their stake to 40% in the flotation, while 300 managers are to secure a paper profit of around £150m (€219m) from their ownership of 14% of the business.
