News Column

Discount retailer B&M joins flotation trail

May 31, 2014

Sean Farrell,

Discount retail chain B&M is seeking a valuation of up to 2.9bn as it joins the faltering trail of companies planning to float on the stock market this year.

The Liverpool-based company is understood to have set the range for its initial public offering at between 230p and 290p a share. The range, which will be used to put a price on the company in discussions with City investors, values B&M at between 2.3bn and 2.9bn.

When B&M announced its intention to float last week it was said to be looking for a valuation of about 2.5bn. The 2.6bn midpoint of the range is said to indicate would-be shareholders' initial enthusiasm from for B&M's growth plans.

B&M has been joined by Australian fashion website MySale in raising money from investors. MySale, backed by Topshop owner Sir Philip Green, who owns 25%, announced its IPO plans on Thursday and is said to be seeking a valuation of 300m to 400m.

The retailers are pressing ahead with their IPOs as the market for flotations cools down from the frenzy in the first few months of the year. Fat Face pulled its float last week because fund managers rejected the 440m valuation placed on the casualwear store chain by its private equity owners.

Saga, the over-50s travel and insurance group also owned by buyout firms, was forced to price its IPO at the bottom of its intended range. Investors have become wary of lofty valuations demanded by private equity firms to cash in their investments, many made at the market peak before the financial crisis.

Card Factory, Pets at Home and Just Eat have all fallen below their IPO prices since the companies sold shares in the last three months, making investors more choosy about which companies can benefit from renewed consumer confidence and economic growth.

B&M is 60% owned by private equity outfit Clayton Dubilier & Rice with the remainder held by the Simon and Bobby Arora, the brothers who bought the business 10 years ago. The company trades from 370 stores selling general household merchandise including electrical goods, furniture and garden equipment at knockdown prices.

Simon Arora said last week that investors believed B&M was a true growth story with the potential to feed shoppers' rediscovered desire for bargains. He plans to open 40 stores a year in the UK over the next 10 years from B&M's northern base, and to expand in Germany.

If B&M is priced at the top of its IPO range, the Arora brothers would reap about 1.1bn and the company would hover just outside the FTSE 100 index. If the offer is priced at the middle of the range, the brothers will make about 1bn.

Other businesses preparing for IPOs include easyJet founder Sir Stelios Haji-Ioannou's easyHotel chain and Zoopla, the property website.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: Guardian Web

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