New Look became the latest retailer to fall under the takeover spotlight yesterday, after the group revealed that its founder and biggest shareholder was considering selling his stake.
Tom Singh, who opened the first New Look store more than 30 years ago, has appointed Deutsche Bank to conduct a "strategic review of options" for his family's 28 per cent stake.
Shares in the company jumped 15.5p to 299p on the news, giving it a market valuation of about £600m and valuing Mr Singh's shareholding at £167m.
Analysts said the move could put the whole company into play, with likely bidders ranging from UK and overseas trade buyers to private equity houses. "Previously Singh's stake may have been seen as a hurdle to M&A activity," Matthew McEachran, at Investec Securities, said.
Tom Hunter, the Scottish entrepreneur who recently failed in attempts to buy House of Fraser and Allders, the department store chains, was tipped as a possible candidate. He owns the d2 retail chain and the shoe group Office. He was unavailable for comment yesterday. Rhys Williams, at Seymour Pierce, said: "With the shares at an all-time high, Tom is more than likely going to sell. No doubt this will bring [buyers] running." Mr McEachran said a bid battle was unlikely to see a "take-out price under 400p", which would value it at £800m.
New Look said Mr Singh had informed the company the review was at "an early stage" and "a further announcement will be made if circumstances require".
City sources said New Look had received a takeover approach worth 320p per share. Analysts said this would be unlikely to satisfy shareholders or the group's board. A management buy-out, led by Stephen Sunnucks, the chief executive, was also touted as a possibility. "Stephen has been a little bit elusive recently. Maybe he's been busy beavering away on something," one analyst said.
New Look, a high street treasure trove for cheap, fashionable items, recently reported a sharp fall in underlying sales and weaker margins. It blamed the trend for skimpy outfits, which cost less than last summer's fashions. Analysts expect next week's trading update to confirm that trading has improved, buoyed by the warm weather, although they cautioned that margins would not recover until the new ranges hit the stores later this month.
Mr Singh, 53, borrowed £5,000 from his parents to open the first New Look store in Taunton, Somerset, in 1969. He was named Britain's fifth-richest Asian in a recent survey.
It took two attempts for Mr Singh to take New Look public. After institutional investors shunned the stock in 1995, forcing Mr Singh to offload 60 per cent to Barclays Private Equity and PPM Ventures, the company was floated in June 1998 at 165p per share.
Initial stock market success, which saw the stock nudge 250p, was marred by a string of embarrassing incidents involving its top management. The then chief executive, Jim Hodkinson, was sacked after he became over-familiar with one of his female staff at an industry dinner.
The company has expanded to 670 stores across England and France. The company is the UK's number three player in the women's clothing market, with a 4.1 per cent share behind Marks & Spencer and Next. Last year pre-tax profits rose 36 per cent to £85.2m.Reuse content