With consumer spending expected to recover, private equity owners of retail chains are keen to launch them on the market – but analysts are wary of the debt they carry
Roll up, roll up for the sale of the century. A parade of retailers with a potential value of £6bn is hoping to join the London stock market this year, cashing in on hopes of economic recovery and improving consumer confidence.
Appliances Online, McColl's, Pets at Home and Boohoo.com are thought to be at the head of a pack of as many as 15 retailers looking to go public, with talk that some could formally announce their intentions within weeks.
Owners may be keen to move swiftly, but with so many retail stocks looking to get off the blocks, investors can afford to be picky, and analysts agree that some of the initial public offerings (IPOs) about which there is so much breathless speculation will not make it to the market. City investors believe the proposals all need careful examination. One leading fund manager says: "The quality of the pipeline is not fantastic. Some of these businesses have been around a while, and it's hard to see what's moved on."
Another says: "It is kite-flying at the moment. We will want a very close look at the financial data." He adds that firms that are toying with a trade sale (to another retailer) as an alternative to a stock market listing might see their value hit rather than boosted.
With equity valuations high and a certain amount of cash floating around after multimillion-pound payouts by the likes of Vodafone, private equity owners see a chance to offload debt-laden retail businesses, which they have been sitting on for years, before a potential interest rate rise increases their costs.
House of Fraser, Game and Fat Face may be shouting about booming sales over Christmas, but all have tricky histories: the department store chain and the clothing retailer were both snapped up by private equity investors at the height of the market, before the credit crunch kicked in.
Companies with high levels of debt, particularly those that have passed through the hands of several private equity firms, will be most closely scrutinised. Investors had a rough ride with former private-equity-held businesses such as Debenhams. One investor says: "We are always careful of anything coming from private equity."
Tony Shiret, veteran retail analyst at Espirito Santo, says: "I don't think investors will accept businesses with any meaningful debt." Investors are, he adds, aware that retailers that have already been stripped of costs by private equity firms could struggle to pay down debt if spending remains lacklustre. "The consumer recovery is a bit unpredictable and it may be that the valuations talked about are illusory."
The online-only retailers, discounters and specialists with room to grow may have the best stories to tell the City. Appliances Online and Boohoo.com are hoping they can ride the same wave of excitement that has lifted shares in fellow e-tailers Asos and Ocado to all-time highs in the past year. The likes of Poundland, Card Factory and B&M Stores, meanwhile, would give public investors a taste of the discount sector, which is gobbling up market share from titans such as Tesco.
**APPLIANCES ONLINE**
*Potential value* £300m
*Ownership* Chief executive John Roberts and finance director Stephen Caunce together own between 50% and 60%, with most of the rest held by business angels
*What it does *Founded in 2000, AO.com sells kitchen equipment such as washing machines and fridges over the internet and is seen as a serious challenger to old high street stalwarts such as Dixons
*Key people *Roberts, formerly of Moben Kitchens, founded AO after being bet £1 he wouldn't. The chairman is Richard Rose, also chair of wholesaler Booker and butchers chain Crawshaw Group
*Advisers* Rothschild, Jeffries, JP Morgan, Numis
*Sales* £275m in year to March 2013 with profit of £8.1m
*Stores *All online
**POUNDLAND**
*Potential value* £800m
*Ownership *Warburg Pincus acquired a majority stake in June 2010, with the remainder owned by senior management
*What it does* Discount chains have been big winners in the recession as middle-class shoppers started looking for bargains in Poundland, Aldi and Lidl. Selling goods from toys to confectionery and cleaning fluids, it has filled the hole left by Woolworths
*Advisers *Rothschild, Credit Suisse, JP Morgan, Shore Capital
*Sales* £880m in the year to April 2013 with profit of £23m
*Key people *Supermarket veteran Jim McCarthy has been running the chain since 2006. He and other senior managers will make millions when it floats. Former Tesco finance director Andy Higginson was brought in as chairman in 2012
*Stores* 517
**PETS AT HOME**
*Potential value* £1.5bn including debt
*Ownership *US private equity firm KKR bought the business for a reported £955m in 2010, with management also thought to have some stake
*What it does *Founded in 1991, Pets at Home sells pet supplies, largely from out-of-town stores. It is planning new stores for this year, and is extending vet and grooming services
*Key people* Chief executive Nick Wood used to run specialist retailer American Golf. Chairman Tony DeNunzio is former chief executive of Asda
*Advisers* Goldman Sachs, Bank of America Merrill Lynch and Nomura
*Sales * £598m in the year to 28 March 2013 while underlying profits rose 9.8% to £101m
*Stores* 369; also online
**BOOHOO.COM**
*Potential value* About £500m
*Ownership *Largely owned by the Kamani family, who also run restaurants and online clothing business Pretty Little Thing
*What it does* Manchester entrepreneur Mahmud Kamani founded Boohoo.com in 2006 with design director Carol Kane. It now claims to be the UK's second-biggest online fashion store after Asos
*Key people* Joint chief executives Kamani and Kane
*Advisers *Zeus Capital
*Sales *£67m in year to 28 February, with profit of £3.2m
*Stores* All online
**FAT FACE**
*Potential value* £400m
*Ownership* Bought for £360m in 2007 by private equity firm Bridgepoint, whose holding stands at 77% following the 2010 refinancing; the remainder held by management and staff
*What it does* Founded in 1988 by ski bums Tim Slade and Jules Leaver, who sold après-ski sweatshirts to finance their lives on the slopes. After years of successful expansion the retailer came unstuck during the recession and now carries £111.5m of debt
*Key people* Former M&S and George executive Anthony Thompson was parachuted in in 2011. Former M&S colleague Sir Stuart Rose recently joined as chairman. Thompson once said Rose "used to drive me bloody bananas"
*Sales* £179m in the year to 1 June 2013 with pre-tax profit of £16m
*Advisers* Lazard, Citi, Jeffries
*Stores* 208
**MCCOLL'S**
*Potential value* £225m
*Ownership* Chairman James Lancaster and private equity firm Caird Capital
*What it does* Founded by Lancaster as a vending machine operator in 1973, it moved into newsagents and then convenience stores across the UK, mainly under the McColl's and Martin's brands. The business is expanding with larger convenience stores
*Key people* James Lancaster, chairman and CEO; Jonathan Miller, finance director
*Adviser* Numis
*Sales* £845m in the year to November 2012, with profit of £6.3m
*Stores* 1,270
**CARD FACTORY**
*Potential value* £700m
*Ownership* Private equity firm Charterhouse bought the business for a reported £350m in 2010
*What it does *Founded by Huddersfield Town football club owner Dean Hoyle and his wife Janet in 1997 in Wakefield, West Yorkshire. It makes its own cards
*Key people* Chief executive Richard Hayes; chairman Dean Hoyle
*Advisers *UBS, Morgan Stanley and boutique firm STJ
*Sales* £286m in the year to 31 January 2013 with profit of £66m
*Stores* More than 700; also online
**B&M RETAIL**
*Potential value* £1bn
*Ownership* 60% owned by US private equity firm Clayton Dubilier & Rice (CDR) with the remainder in the hands of brothers Simon, Bobby and Robin Arora
*What it does* Started in Blackpool in 1978. The Arora brothers acquired the chain in 2005 when it had 21 stores and expanded rapidly. The CD&R deal valued the retailer at close to £1bn and it is virtually debt-free. B&M sells kitchen and homewares, decorating materials and manufacturers' clearance lines
*Key people* Simon Arora is chief executive Former Tesco boss Sir Terry Leahy and Unilever's Vindi Banga are also on the board
*Advisers* Not appointed yet
*Sales* £935m in 2012, with profit of £84m
*Stores* 370
**HOUSE OF FRASER**
*Potential value* £350m
*Ownership* The 160-year-old department store group was bought off the stock exchange for £351m in 2006 by a consortium led by defunct Icelandic investor Baugur and is now 49%-owned by administrators of failed Icelandic banks. Other investors include Sir Tom Hunter and fashion entrepreneur Kevin Stanford
*What it does* In its previous life as a listed company it was dubbed House of Failure. Under private ownership it has revamped its stores and brand and moved upmarket
*Key people *Ex-Matalan boss John King is chief executive. Chairman is Don McCarthy
*Advisers* Rothschild, HSBC and Numis
*Sales* £1.2bn in the year to 26 January 2013, with pre-tax loss of £8.2m
*Stores *60
**GAME**
*Potential value* £200m
*Ownership* Controlled by Capitex Holdings, a body partly owned by buyout firm OpCapita
*What it does *Previously listed on the London Stock Exchange, Game was bought out of administration in April 2012 when it was forced to close several hundred unprofitable stores. It has been revived by the launch of consoles such as the PlayStation 4 this Christmas
*Key people* Martyn Gibbs, chief executive, previously ran the Gamestation chain until it was bought by Game. David Hamid, chairman, used to be chief executive of Halfords and was chairman of MFI
*Advisers* HSBC, Canaccord Genuity and Liberum Securities
*Sales* Around £500m in the year to July 2013, with pre-tax loss of £18.2m
*Stores *320
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*The Hut *Online retailer
*New Look *Fashion chain
Reported by guardian.co.uk 5 hours ago.