GUS may pull out of £2bn Burberry flotation

The City

Speculation is rising in the City that the £2bn stock market flotation of Burberry, the luxury goods brand, will fall victim to the events in the United States last week.

GUS, the retail and financial information group which owns Burberry, had hoped to seek a partial initial public offering (IPO) of the business by June next year.

But analysts say the fall-out from the terrorist attacks in the US will force Burberrys' value down so far that GUS will decide to pull the float altogether.

Prada, the ultra-trendy Italian fashion house, cancelled its £4bn Milan float on Tuesday. And LVMH, the French luxury goods group, issued a profits warning yesterday.

Last December GUS announced that it would seek a partial flotation of Burberry within 18 months. It was looking to float around 20-25 per cent of the business, using the proceeds to pay down debt.

At that time analysts valued Burberry at £1bn-£2bn. Yesterday analysts were looking to downgrade their valuations to the bottom end of that range, with some suggesting it could even be worth less than £1bn.

Nathan Cockrell, at Credit Suisse First Boston, said he was considering cutting his valuation from £1.75bn to £1.5bn.

"In the light of current events, we are increasingly sceptical about whether it [the float] can be done," he said.

There was negligible appetite for global IPOs and shares in luxury goods firms had been badly hit, he said.

Another analyst said: "They will have to look at what the growth profile looks like. If everything is still pear-shaped by next June then there won't be a market for it at any price."

Though less than 20 per cent of Burberrys' sales come from America, it also has large exposure to the struggling Japanese market. A delay to the float would affect GUS's share price as the group would retain its conglomerate discount.

GUS was sticking to its original statement on Burberry yesterday ahead of a trading update on 11 October.

"The float is still on track to take place by next June, subject to market conditions," it said.

GUS shares fell another 13p to 483.5p.