Business View: Turn Dirty Harry loose on the Debenhams float

Which punk do you think is lucky - the City or the management?
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In perhaps his most famous role, as maverick cop Harry Callaghan, Clint Eastwood points a .44 magnum ("the most powerful handgun in the world") at a shotgun-toting thief and ponders whether he has used up all the bullets in the six-shot cylinder. He then says: "You've got to ask yourself one question: 'Do I feel lucky?' Well, do ya, punk?"

The police chief in the film says that you do not assign "Dirty" Harry to cases, "you just turn him loose". Well, Harry, we need you. We want to turn you loose on the case of the Debenhams billions.

The scenario is this. The department store chain was sold to a bunch of venture capitalists in 2003 for £1.7bn, after a competitive auction. Since then, its backers have taken an astonishing £1.3bn of cash out of the company and are now trying to sell it back to the stock market with a price tag of nearly £2bn. As the new company will also have £1.2bn of debt, this implies an "enterprise value" of £3.2bn.

This would mean the value has more than doubled in three years, at a time when the high street has hardly been going though one of its greatest booms and when other department stores have not had the easiest of times. While it is not quite in the league of Philip Green, who turned almost-bankrupt Bhs into a billion-pound business and squeezed a similar amount out of Arcadia, it is still an amazing result.

But Mr Green has not offered either of his businesses to the market, so we do not have to decide whether anything is left for investors. With Debenhams, we have to ask, "how much juice is left in this lemon?"

The buyout team has got rid of scores of managers, cut the terms to suppliers, leveraged anything that can be leveraged and increased market share. All is textbook buyout management, executed brilliantly. But can buyout managers run a public company? Look at Britvic.

City analysts are queuing up to say that this float is too expensive, but we have nothing but financial information to go on (which really gives no good feeling for how healthy Debenhams actually is). Investors should wonder whether they believe the City, which clearly underpriced Debenhams when it sold it in 2003, or the management.

As Dirty Harry would say: "Do I feel lucky?" Well, do you?

Goldman turns tail

Yah boo, Goldman Sachs. You claim to be masters of the universe. Yet you are scared of hostile bids. What is going on?

It seems that Wall Street's most aggressive investment bank is turning yellow. But while this might go down well with some clients, others may be restive. The fact that BSkyB dropped Goldman as brokers last week was seen as a reaction to the bank's involvement in the bid for ITV. But I see another interpretation.

Rupert Murdoch wants to do a few more deals before he pops his clogs. He does not want advisers who turn tail when there might be a fight.

Standard Life wobbles

I am starting to get worried about the Standard Life demutualisation. I have a substantial financial interest in its success - as it will give me a windfall large enough to pay for the astronomical cost of having my boiler repaired. So I want 75 per cent of policyholders to vote for the Scottish mutual to ditch 181 years of tradition. But the fact that a third of policyholders have yet to communicate with Standard Life about the float worries me.

What worries me even more is the thumping document that arrived on our doorstep on Thursday. Not the one for me, but the one for a former resident of our house who moved out in 1997. I can't recall seeing any other Standard Life correspondence for him. Could there be serious errors in "Britain's largest-ever mailshot"? And could that put the skids under the UK's largest float for five years?

j.nisse@independent.co.uk

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