COMMENT: Retailers not ready to cash in their chips
Matalan halted sale talks this week
It has been a week of dashed hopes for two UK fashion retailers, with value chain New Look pulling its IPO and discount store Matalan shelving plans to sell up, but patience could still prove to be a virtue for both.
New Look today (12 February) becomes the latest in a series of private companies to shelve flotation plans in the midst of turbulent equity markets.
Theme park operator Merlin Entertainments and travel services group Travelport both took the same measure this week, for instance.
It follows news that Matalan is pulling the plug on a sale process initiated last year, after private equity bidders failed to meet founder John Hargreaves' reported GBP1.5bn (US$2.35bn) price tag for the chain.
Both developments illustrate a continuing fragility in the UK finance sector, but could also suggest that New Look and Matalan believe a better climate is just around the corner.
While New Look is merely postponing its flotation plans, Hargreaves will keep Matalan's doors open to substantial bids even if a buyer cannot be immediately found.
Furthermore, while a nine-figure valuation remains in the public domain he can negotiate without saying a word.
New Look, owned by private equity groups Permira and Apax Partners, and founder Tom Singh, has a more urgent need for investment because the company's IPO (initial public offering) was designed to raise GBP650m (US$1bn) to cut borrowings.
The IPO was expected to subsidise further store expansion too, with the retailer maintaining solid sales by selling affordable fashion to cash-strapped consumers.
Matalan is also hitting a purple sales patch, having boosted Christmas takings by 15% this year, and buyout talks have not been short in attendance - reportedly including private equity firms TPG, Advent and Warburg Pincus.
Therefore, while investment plans for New Look and Matalan appear rooted to the ground, both remain hot property.
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