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Retail big hitters face off once more on stock market following flotations: Sir Terry Leahy: Sir Philip Green: Ex-Tesco chief Leahy back with bargain store B&M Topshop boss Green also investing in discounter

June 13, 2014

Sarah Butler



Chairman of B&M Value Retail, a discount home and groceries retailer founded in Blackpool in 1976. When the Arora family bought it in 2004 it had 20 stores. Today it has around 370 including about 50 in Germany

Market capitalisation on launch - pounds 2.7bn

Sales - pounds 1.27bn

Profits - pounds 130m

Two of retail's biggest names roared back on to the stock market yesterday as former Tesco chief executive Sir Terry Leahy and Topshop boss Sir Philip Green successfully tapped into the public markets' appetite for discount retailers.

Leahy is chairman of B&M Value Retail which debuted on the London Stock Exchange at a value of pounds 2.7bn, putting it just outside the FTSE 100.

The three Arora brothers, who built the company into a 350-store chain, and their private equity backers, Clayton, Dubilier & Rice, shared a pounds 1bn payout as the retailer launched at a share price of 270p, towards the upper end of a mooted 230p to 290p range.

Leahy's share in that bonanza and the stake he holds in the listed business was not revealed in the company's prospectus, which was issued via the Luxembourg stock exchange, where B&M is officially headquartered.

The document said Leahy did have an interest in the company but it was held via a Cayman Islands' registered fund which controls CD&R's 31.4% stake in the retailer.

Leahy's return to the stock market pits him against his former colleague, Philip Clarke, who now runs Tesco, as well as the supermarket's former finance director Andy Higginson, who chairs rival discounter Poundland.

Leahy has said he is disappointed by performance at Tesco, which has been hit since his departure by falling sales, and profit warnings in the face of competition from discount retailers including B&M and Poundland.

Meanwhile, Green's Shelton Capital fund, controlled by his Monaco-based wife Tina, held on to all its shares in Mysale when the Australian online fashion flash sale operator confirmed its float price yesterday.

Shelton's 22% stake, bought only last month, was worth pounds 75m at the company's 226p launch price, which valued the company at pounds 340.5m.

Green, who has not held stock in the public markets since he was ousted from discount retailer Amber Day almost three decades ago, said: "I think Mysale's in an interesting sector and I like the global aspect. It's got no debt and cash in the bank and they are good ingredients to start with."

Green, who said he was happy to play a backseat role as a shareholder rather than joining the company's board, also said he liked the fact that the founding family investors were retaining an interest in MySale after the flotation.

Founder Jamie Jackson took out pounds 5.5m but retains a 31.5% stake in the business, however his brother Carl Jackson, the firm's chief executive, sold his entire 8% stake, worth pounds 24.5m, and their private equity backer Insight Venture Partners halved its stake to 5.2%, taking an pounds 18m pay-out.

At B&M, brothers Simon and Bobby Arora will continue to run the bargain basement chain, which they bought in 2004 when it had just 20 outlets.

They each hold a 14% stake in the business as part of a total 30% family stake. The business is retaining pounds 75m of the new money raised to invest in expanding in the UK and Europe.

Shares in B&M rose more than 6% to 287p on the first day of trading as investors were eager to get a stake in the fast-growing discount sector, even though B&M's rival Poundland has had a bumpy ride since it floated in March.

Simon Arora, chief executive of B&M, said: "We are delighted that investors have demonstrated their support for B&M and its growth story in the value sector and that they share our excitement about the group's future."

Analysts said the successful flotations of B&M and Mysale showed that the market enthusiasm for retail initial public offerings had not faded.

There had been fears that the market was drying up after clothing chain Fat Face recently abandoned plans for an IPO while video game seller Game Digital priced its flotation at the lower end of expectations as a string of recently floated retailers including Pets at Home, AO World and Card Factory slipped below their offer prices. B&M was valued ahead of rival Poundland which dipped below pounds 900m yesterday as its shares fell 2.35%.

Kate Calvert, an analyst at Investec, said: "Deals are still getting done. There has been a huge number of IPOs in the past few months but retailers which are different and have attractive stores are still finding investors. They are just being a bit more selective."

However Espirito Santo analyst Tony Shiret warned that investors might be paying too much for discount retailers just as shoppers were getting more money to spend.

Sir Philip Green

Captions:

His Shelton Capital fund owns 22% of online retailer Mysale, which runs quick sales of branded fashion. Founded in Sydney in 2007, it now operates 11 websites mostly in Australia, New Zealand and south-east Asia with plans to launch in the UK this year.

Market capitalisation on launch pounds 340.5m

Sales - A$184m (pounds 103m)

Profits - A$8.7m (pounds 4.9m)



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Source: Guardian (UK)


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