Debenhams faces £1.5bn Permira bid

For Sale: Cash-rich private equity bidders have undervalued retailers on their shopping list
Click to follow
The Independent Online

Debenhams became the latest department store chain to join the bidding frenzy engulfing the sector after the chain's management team joined forces with Permira, the private-equity group, on a possible £1.5bn takeover offer.

Debenhams became the latest department store chain to join the bidding frenzy engulfing the sector after the chain's management team joined forces with Permira, the private-equity group, on a possible £1.5bn takeover offer.

The group said it had received an approach worth 425p a share from Permira last week. Belinda Earl, Debenhams' chief executive, and Matthew Roberts, its finance director, are also working on the indicative proposal, which was announced just hours after Selfridges bowed to a £598m takeover bid from Galen Weston, the Canadian billionaire.

Shares in Debenhams soared 25 per cent to 409.25p on hopes that Permira's move would spark a fresh bidding war in a sector that has seen a flurry of activity in the past few months. Selfridges is set to join Harvey Nichols and Allders, which have both been taken private in the past six months, while House of Fraser rejected a £197m offer from Tom Hunter, the Scottish retail entrepreneur in January.

In a statement, Debenhams said: "The board of directors has agreed that the executive directors may work with Permira on this indicative proposal." A company spokesman added: "It's not a management buyout. It's a public-to-private deal for which they want the management to be involved."

Debenhams said it had established an independent committee, comprising its chairman, Peter Jarvis, and its non-executive directors, "to consider any firm offer put forward".

Analysts said the losing parties in the Selfridges takeover battle may re-emerge as bidders for Debenhams. Nick Bubb, at Evolution Beeson Gregory, said: "It's not a trophy but there could be quite a few people looking. It feels like it's not the last bid we'll see for Debenhams."

Mr Hunter, one of Selfridges' suitors, and Terry Green, who teamed up with the property group Minerva to bag Allders, were the favourites to join the fray, although analysts cautioned that the £1.5bn-plus asking price would limit the number of possible predators.

A Debenhams spokesman said nobody else had contacted the group since it made the announcement. The company said: "This indicative proposal is preliminary and subject, inter alia, to due diligence and financing and, consequently, there can be no certainty that a firm offer will be made."

Sources close to the talks said Permira hoped the management team would take an equity stake in the business.

Analysts said Permira, formerly known as Schroder Ventures, was lured by Debenhams' cash flow rather than its asset value. They questioned the scale of possible cost savings, citing Debenhams' strong track record as one of the sector's best operators. "Permira could be looking to participate in a wider sector consolidation play," one retail analyst said.

Permira won plaudits for clinching one of the retail deals of the decade last year, when it offloaded the Homebase do-it-yourself chain to GUS for £900m last autumn, banking an estimated profit of £450m.

Debenhams, which owns 102 stores across the UK and Ireland, has £400m of freehold property and £135m of debt. It was demerged from the old Burton group, which became Arcadia, in 1998, although its origins date back to 1778. The company, which was named after a Clark and Debenham shop that opened in London's Wigmore Street in 1813, was first taken public in 1928. It spent 13 years as part of the Burton family after being acquired by Sir Ralph Halpern in 1985.

The group prospered from the decline in the fortunes of Marks & Spencer, thanks to its designer clothing ranges. It made pre-tax profits of £96.5m in the six months to end-February.

BELINDA EARLE

From shop to the top: The limelight-shy Belinda Earl joined the elite rank of female chief executives when she took over from Terry Green in 2000. Ms Earl, 41, was a Saturday girl at the department store and made history when she became the first woman to return to be chief executive of a major company after maternity leave.

Comments