BHS

Private Equity Set to Bid for Lossmaking BHS

by

January 27, 2015

The retail industry isn’t having the easiest of time, as high street is losing out to online retailers. Sir Philip Green became the latest to announce he is looking to sell his retail company, BHS, and private equity firms are expected to be among the bidders.

 

Tough Times for BHS
Sir Philip bought the company in 2000 from Storehouse in a deal worth £200 million. Two years later, Sir Philip acquired the Arcadia group for £800 million and he owns a number of other retail companies in the UK. The Sunday Times announced the news on Sunday, citing people close to the source.

 

In November, the company announced that its financial results haven’t been hitting targets, as BHS made a loss of £21 million in the year ending at the end of August 2014. The previous year, the company’s deficit stood at £19.3 million, so times haven’t been easy on BHS. The times were much better in 2005, when Sir Philip was able to pay himself £1.2 billion dividend.

 

The rise of online shopping has been one of main reasons behind slow sales together with weaker consumer confidence in the UK. According to the Financial Times, the company has tried to improve its performance by selling store locations to Primark, as well as Sir Philip installing his other brands to BHS stores, such as Dorothy Perkins.

 

His latest bid to increase sales included the introduction of food departments, “supplied by cash and carry wholesaler Booker,” according to the article, which have been proven to be successful attempts to boost sale.  The slight boost in sales is good news, as the Daily Mail reported data by the Companies House, stating BHS’ sales decreased by 3.5% in 2013. Although reportedly Sir Philip wasn’t too worried by the recent lossmaking, as his other companies continued to perform strongly.

 

Potential Bidders
There has been interest in the company in the past. Names such as, Christo Wiese, the South African billionaire and the restructuring group Hilco have been linked to BHS. On top of this, private equity firms, most notably US firm Apollo Global Management, have been mentioned. Independent retail analyst, Nick Bubb, told the Financial Times, the company might also be sought by Asda, which is hoping to launch itself as one of the biggest supermarket chains in the UK.

 

Sir Philip hasn’t been keen to sell in the past, mainly due to low valuations. According to the Daily Mail, the bids he has received so far are much more satisfactory. Private equity has been drawn to the retail industry in the early stages of 2015 with the Dick’s Sporting Goods speculation putting the retail sector back in the spotlight. Even though the sector has seen some positive news in the recent months, the breakdown of buyout talks between Express and the private equity firm Sycamore proves that the industry is still going through some tough times.

 

It remains to be seen when Sir Philip will go public with the plans and whether the potential bidders include a range of private equity firms, other than just Apollo. 

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