Debenhams prepared to list on the London stock market for the third time today after a spell away from the limelight proved profitable for owners and managers.
The retailer could be valued at up to £1.95bn (€2.8bn) in the flotation, which is scheduled for May 4 in the City’s biggest listing of the year so far.
A trio of private equity firms took the business private in late 2003, before doubling returns on their original equity stake of £600m (€866.8m) through a refinancing and a series of growth measures at the department store chain.
The consortium, which includes Texas Pacific and CVC, will reduce its stake to 40% in the flotation, while 300 managers are set to secure a paper profit of around £150m (€216.7m) from their ownership of 14% of the business.
Among them, chief executive Rob Templeman, chairman John Lovering and finance director Chris Woodhouse are expected to make in the region of £100m (€144.5m). They will still retain significant shareholdings following the shares offer.
Debenhams, which first listed on the stock market in 1928 and then again in 1998 when it demerged from Burton, will return with debt of £1.2bn (€1.7bn).
The group must now convince institutional investors that there is value left in the business, particularly at a time of slowing sales growth.
Stockbroker Collins Stewart said it would carry an “avoid” rating on the stock, while David Buik of Cantor Index pointed to fears in the market that the “goose may already have laid its golden eggs”.
Shares are due to be priced at between 195p and 250p, but Mr Buik recommended an issue price of not much higher than 200p.
He said: “If it is priced sensibly, there is no reason why investors will be anything other than happy to pick up the stock.”
Debenhams achieved a like-for-like sales improvement of 2.8% in the year to September, but this figure declined to 0.6% in the 26 weeks to the beginning of March.
The company pointed out its recent performance compared favourably with other UK retailers and that its gross margins had also improved.
It currently has 123 stores, but believes it has room for double that figure, alongside expansion of its smaller Desire By Debenhams fashion stores.
Since 2003, under its current management team, sales have increased by 15% to more than £2bn (€2.9bn) and its share of the department store sector increased from 15.2% to 18.6%.