New Look turns tail on sale and plumps for £1.7bn flotation next month

Fashion retailer will have net debt of £450m after IPO
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The Independent Online

New Look ended months of speculation yesterday by confirming it plans to raise £650m with a flotation next month to slash its debt mountain and fund expansion, in the latest sign of returning demand for retail investments.

The fast fashion retailer intends to use funds generated by the initial public offering (IPO) to slash net debt to £450m. This will give it ample headroom to continue growing in the UK and internationally, as well as strengthen its men's and children's wear and e-commerce services. The IPO, planned for mid-March, is likely to value New Look at about £1.7bn.

The 1,010-store retailer had been running a twin-track process of considering a float or sale, but Carl McPhail, the chief executive of New Look, said: "We believe this is the best option for the New Look business."

While New Look is focused on an IPO, it would still consider a sale if any last-minute bid was made. The retailer – which was taken private in a £699m deal backed by the private equity firms Apax and Permira in 2004 – cancelled a flotation in 2007 before the credit crunch.

Among other retailers, the online grocer Ocado and the owner of the Superdry fashion brand are considering IPOs this year. Last week, Pets at Home, the pet accessories business, was bought for a lofty £955m by US private equity firm Kohlberg Kravis Roberts.

New Look yesterday hired three non-executives to the board: Stella David, the chief executive of William Grant & Sons, the owner of Grant's Scotch whisky; Carolyn McCall, the chief executive of Guardian Media Group; and Henry Staunton, a non-executive director at Ladbrokes and Legal & General. It hired John Gildersleeve, currently chairman at Carphone Warehouse, as chairman last month.

The debt-reduction plan is an attempt by New Look to distance itself from previous highly leveraged IPOs, notably that of Debenhams, whose shares slumped after it floated in 2006 when saddled with debt.

Alastair Miller, New Look's chief financial officer, said: "[Less debt] was certainly a key part of our plans to make sure that when we return to the market we had a level of debt we as a business – and our prospective investors – were comfortable with."

Mr McPhail and his team will head out on a series of road shows from next week meeting investors. A prospectus is expected to be sent out in two weeks.

New Look also raised the possibility of a limited secondary sell-down by existing shareholders. Apax and Permira each have a shareholding of 27.7 per cent; its founder, Tom Singh, has a 23 per cent stake; and management, including 150 branch managers, hold 16 per cent.

For the year to 28 March 2009, New Look delivered adjusted underlying earnings up by 10.2 per cent to £217.6m, on group sales higher by 14.9 per cent at £1.32bn. In addition to 601 stores in the UK, New Look has shops in countries including Russia, Poland, Egypt and the Middle East, as well as 307 branches in France and Belgium, where it trades as Mim. But the French market has been one of its most challenging recently.

In the UK, New Look – whose core customers are women aged 16 to 45 – has recently shown some of its main rivals, including Next and Marks & Spencer, a clean pair of heels. For the 14 weeks to 2 January, New Look delivered underlying sales up by 5.9 per cent.