Founder tries to buy back Julian Graves as Baugur considers multiple bids
Icelandic giant gets more than five bids for the chain as chief executive ponders approach
Thursday 03 July 2008
Baugur is understood to have received more than five bids for the health food chain Julian Graves, following the Icelandic investment group's decision to conduct a strategic review of the 335-store retailer.
It is thought that a mixture of trade buyers and finance houses have expressed an interest in the health food retailer, which sells product ranging from goji berry seeds to almonds. Last year, market speculation linked Holland and Barrett's American owner NBTY to a bid for Julian Graves, but there is no indication they are in the frame this time around. A Baugur spokeswoman said: "We have had good interest and a number of bids already," although she declined to answer further questions.
However, it has emerged that Nick Shutts, Julian Graves chief executive, is also considering making a bid for the retailer he founded in 1987, although a bid has not yet materialised.
This week, Mr Shutts is reported to have said: "My management team and I would be delighted to reacquire the business. The management team and I are clearly discussing with Baugur how we can help them achieve their goals. I firmly believe the management team and I have the right people to take this business to the next level." Mr Shutts owns a substantial stake in the company, believed to be about 20 per cent, but it is unclear how he would structure a deal.
A Baugur spokeswoman said: "Baugur would welcome a bid from Mr Shutts." Last month, Baugur said it had appointed Deloitte to look at strategic options for the retail chain, but a sale is just one option being considered by Baugur.
Previously, Baugur – which owns stakes in high street retailers including frozen food specialist Iceland, toy retailer Hamleys, department store House of Fraser and fashion chain Oasis – has said the strategic review of Julian Graves fits its strategy at reviewing parts of its retail portfolio. This year, Baugur restructured its business by selling its media, technology and financial services units, in order to focus on its retail investments.
Baugur also owns coffee and tea specialist Whittard of Chelsea, which operates under the same holding company, Barney Holdings, as Julian Graves.
Baugur bought an 80 per cent stake in Julian Graves for £14.7m in 2003, when it had around only 200 stores but, since then, it has expanded rapidly to have 335 shops.
Julian Graves made a pre-tax profit of just £700,000 for the year ended 31 March 2007. The health food retailer's total sales jumped by 18 per cent to £61.7m for 2007 period, compared with £52.3m a year earlier. The leap in sales was a combination of Julian Graves' store expansion programme and a rise in like-for-like sales.
After making interest payments of £5.8m, Barney Holdings posted a pre-tax loss of £8.8m in the year to March 2007. However, Whittard underperformed its stablemate by posting a pre-tax loss of £3.2m over the period.
However, Baugur's decision to consider selling the health food chain has highlighted the challenges faced by small-to-medium sized retailers on the high street. It is unclear how Julian Graves is currently trading, but some industry experts believe it could be finding trading challenging, given that its product offer fits the bill of discretionary spend.
Robert Clark, senior partner at retail market analyst company Retail Knowledge Bank, said: "Under the circumstances many of those things [products] can be bought elsewhere or are not essential if consumers are looking to withdraw their horns."
Mr Clark said their products are "almost the ultimate discretionary spend," although he points out that the average spend in Julian Graves stores was just £4.30 last year, which will help it during the downturn.
However, Mr Clark believes that Julian Graves may need to temporarily put the brakes on its juggernaut store expansion programme across the UK and conduct a review of its store portfolio.
"There is a distinct danger of over expanding and having a growing proportion of under performing outlets in the portfolio," he added.
Julian Graves and Deloitte declined to comment.
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