In the UK there are a limited number of fashion businesses listed on Aim and the London Stock Exchange main market, with the most high profile being Next and Burberry. This number also includes retailers for whom clothing is currently a bolt on, such as Tesco and Sainsbury’s.
With private equity houses finding transactions more difficult to put together, due to a lack of debt funding, there is renewed interest in equity capital markets as a means of realising value and raising additional capital for expansion into existing and new markets.
Supergroup, which owns the Superdry brand, has announced plans to list in the first half of 2010, with the intention of raising capital of £125m. Supergroup currently has a significant high street presence in the UK. Following flotation, the company proposes to roll out new stores in the UK, increase its international presence, and develop and extend product areas for its brands Superdry, SurfCo California and 77Breed.
The markets are perceived as turbulent at present and several high profile mooted IPOs have been pulled suddenly in the past few weeks. New Look, currently owned by private equity groups Permira and Apax Partners, and founder Tom Singh following it being taken private in 2004, was reported to be looking to raise US$1 billion in an IPO in order to reduce its borrowings and subsidise store expansion. However, this is now off the cards for the immediate future.
After travel services firm Travelport also pulled its IPO some fund managers have cautioned that the IPO window has closed. Others have been less inclined to dismiss future market opportunities and attribute the reluctance to float to concern over the attracting investors in at the right price.
Returning to the stock market was also an option which is widely reported to have been under consideration at value retailer, Matalan. Matalan was taken private in 2006, however, controlling stakeholder John Hargreaves had put the company up for auction in late 2009. Private equity groups, thought to include Advent, TPG, and Pincus Warburg, were amongst the bidders to acquire Matalan. However, as no bidder was able or willing to match the reported sought after price tag of £1.5 billion, Matalan confirmed in mid February that the sale process had been closed down for the time being.
Current IPO activity is not confined to the UK. Apparel retailer Express, with 573 stores across the US, has made a SEC filing to raise up to $200m. It is currently controlled by private equity group Golden Gate. It is aiming to open some 150 new stores over the next five years in anticipation of a retail recovery in the US.
While the market remains unstable, with private equity houses ultimately looking for exits and businesses seeking alternative ways to fund growth, IPOs are still an option. The key as it has always been will be judging the appetite for investment and making sure the price is right!
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