Matalan terminates £1.5bn sale of company
Thursday 11 February 2010
The discount fashion and homewares retailer Matalan has called off its sale process after buyers refused to meet the price expectations of its founder.
Speculation had been mounting that the private equity firms TPG, Advent International and Warburg Pincus were edging away from the £1.5bn price tag put on the 203-store chain by John Hargreaves.
The end of any potential deal talks sends a warning shot across the bows of other big retailers mulling a sale this year. It may also cause concern at New Look – the private equity-backed fashion retailer that plans to float on the Stock Exchange next month – about investor appetite for such big deals.
Matalan has enjoyed a revival during the recession. For the 13 weeks to 2 January, it delivered like-for-like sales on stores open more than one year up by 9.3 per cent, while total sales soared by 10.4 per cent to £362m.
At the time, Alistair McGeorge, the chief executive of Matalan, said: "We are pleased to report this impressive performance in what continues to be a tough competitive environment. The shopping experience for our customers continues to improve as we innovate and refresh across our stores. Our ranges continue to strengthen and we always offer fantastic value to our customers. We are well placed to continue this growth and will be accelerating our rate of investment to drive this."
Mr McGeorge said that cash generation had been strong over the period and that it had cut debt levels significantly, compared with when it was taken private in 2006.
It plans to open between 15 and 20 stores in the Middle East.
A sale would have netted hundreds of millions of pounds for Mr Hargeaves, who took the retailer off the stock market in 2006 in a £827m deal, supported by £410m of debt. He is thought to have ruled out another flotation for Matalan, which he founded in 1985.Mr Hargreaves, who left school at 14, is the son of a Liverpool docker.
Over the year to 28 February 2009, Matalan delivered earnings before interest, tax, depreciation and amortisation up by 6.3 per cent to £145m. Total sales grew by 2 per cent to £1.04bn.
The retailer competes against retailers including Primark, Next, M&S, New Look, as well as the clothing offerings of the big supermarkets Asda, Tesco and Sainsbury's.
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