GUS shares soar on pounds 1bn acquisition

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The Independent Online
Great Universal Stores, the mail order giant, made a surprise move yesterday when it agreed to pay pounds 1bn for Experian, an American information services company. It is GUS's first significant acquisition for more than 30 years.

GUS's shares soared 57.5p to 648p on the news as the City took the deal as a sign of a new era at the slumbering retail giant where Lord Wolfson of Sunningdale took over as chairman in August.

The City had been pondering the possibility of a share buy-back, a demerger of the group's Burberry division, or a deal to acquire Next, the highly successful stores group where Lord Wolfson is non-executive chairman.

Lord Wolfson admitted publicly for the first time yesterday that the GUS board had discussed the possibility of a Next takeover "several times".

The Experian acquisition virtually wipes out GUS's pounds 1.2bn cash pile, leaving the company with net cash of pounds 150m.

GUS is buying Experian to merge it with CCN, its own credit rating and database business which has been the fastest growing part of the group over the last four years. Discussions on the deal started in June.

"This is a unique opportunity to create a truly global business with the fullest range of information products across the globe," Lord Wolfson said. He added that it would give the enlarged business critical mass in the US, enable it to offer a more comprehensive service to multi-national clients and reduce the cost of new product development. It will be able to expand more rapidly in developing economies where use of credit is growing rapidly.

Both CCN and Experian have developed vast databases on consumers, businesses, vehicles and property. CCN holds credit details on 44 million people, 3 million businesses and 50 million vehicles. Experian's three databases - on consumers, businesses and real estate - contain information on 190 million individuals, 31 million households and 53 million properties.

CCN is stronger in retail location services where it works on behalf of companies such as McDonald's and Boots to target the best locations for new outlets. Experian has been developing a powerful new software system, File One.

Based in Orange County, California, Experian was originally part of TWR, a US automative and engineering company. It was sold to a consortium of businesses in February for $1.2bn (pounds 721m). It recorded profits of $109m on sales of $540m last year though profits growth has been slowing. CCN was founded in 1980 and is based in Nottingham. It recorded profits of pounds 24m on sales of pounds 118m last year.

City analysts welcomed the deal. Tony Shiret of BZW said it reduced GUS's dependence on the UK mail order market and would add pounds 30m of profits next year. John Richards of NatWest Securities said that while the deal "looked good", the decline of GUS's core home shopping business still needed to be addressed.

GUS reports its half-year results in two weeks.