London-based equity houses Apax Partners and Permira have finalised terms of a 348 pence per share offer for listed UK fashion retailer New Look, valuing the company at £699.1 million (€1.03 billion; $1.32 billion).
The offer is at a 36 per cent premium to New Look’s share price of 255 pence on 7 July 2003, the day when news of New Look founder Tom Singh looking into taking the business private first broke.
Singh, who currently controls a 28 per cent stake in the company, New Look managers and the equity sponsor are bidding through Trinitybrook, a new vehicle set up to complete the acquisition.
The offer takes the form of a scheme of arrangement which according to Alex Fortescue, a partner at Apax involved in the deal, has several advantages in a privatisation process: “It’s quicker than a bid under the takeover code, the outcome is certain either way, and there is also a modest financial advantage relating to stamp duty,” Fortescue said. Schemes of arrangement have been used in a number of recent public-to-privates in the UK.
To succeed, Trinitybrook requires shareholders owning 75 per cent of New Look’s issued equity capital to accept the offer. The transaction is scheduled to be completed on April 4.
Apax and Permira are expected to invest £100m each in return for a 30 per cent stake in the business. Tom Singh and his family will own 23 per cent of the shares.
Singh first approached Apax in May of last year, and in July appointed Deutsche Bank as an adviser. Apax, after initially approaching Texas Pacific to co-invest in the deal, subsequently agreed to share the financial outlay with Permira.
Commenting on the syndicate’s plans for the business post-closure, Fortescue said: “The emphasis is on organic growth, but if the right opportunity comes along, we will be in a position to invest up to another £100m of equity in add-on acquisitions in Europe and the UK.”
Fortescue also said he was confident the bid was going to be successful, and that no rival offers were expected to emerge at this stage.
Hypovereinsbank, HSBC and Credit Suisse First Boston have been instructed to arrange debt financing for the deal. New Look is being advised by Citigroup and Cazenove. UBS is working alongside Deutsche Bank to advise Apax and Permira.
According to Bloomberg News, New Look has agreed to pay Apax and Permira a break fee of £7.3 million pounds if the takeover fails.