Consortium tops Debenhams offer

CVC, Texas Pacific and Merrill Lynch Private Equity have made a 455 pence per share recommended offer for the UK retailer, superseding the Permira consortium’s 425 pence offer made in July.

Just over six weeks after recommending a 425 pence per share offer from a consortium of Permira, Goldman Sachs and Blackstone, the board of UK retailer chain Debenhams has accepted an improved offer from a rival consortium of private equity firms.


CVC Capital Partners, Texas Pacific and Merrill Lynch Global Private Equity have offered 455 pence per share for the UK department store, valuing the business at £1.66bn (E2.37bn). The offer is pitched at a 7.1 per cent premium to Permira’s offer.


This morning, Permira issued a statement saying it was “considering its position” following the improved offer.


The latest consortium brings together John Lovering, who was linked with an offer for UK supermarket chain Somerfield earlier this year, and Rob Templeman, chairman of UK auto equipment retailer acquired by CVC in 2002. Chris Woodhouse, deputy chairman of Halfords, also joins the bidding team.


“Debenhams is one of the UK’s great retail companies with strong operating performance and a leading market position,” said Lovering. “We believe there is a wealth of management expertise and experience in the business and we are excited about the company’s future.”


Debenhams operates 103 department stores in the UK and Republic of Ireland and 10 international franchise stores located in Europe and the Middle East. For the year ended 31 August 2002, the group reported turnover of £1.7bn (2001: £1.61bn) and a profit before tax of £153.6m (2001: £146.1m). As at 31 August 2002, the Debenhams Group had net assets of £725.3m (2001: £668.6m) and net debt of £127.0m (2001: £124.6m).


Texas Pacific and CVC each hold a 41 per cent stake in Baroness Retail, the acquisition vehicle set up to acquire Debenhams, with Merrill Lynch holding a 16.67 per cent stake. Debt facilities have been arranged and underwritten by Morgan Stanley and Credit Suisse First Boston.


In early trading this morning, Debenhams shares were trading at 458 pence, suggesting that investors anticipate a further improved offer.


The Baroness consortium is being advised by Morgan Stanley. The independent directors of Debenhams are being advised by Greenhill, the independent M&A advisor.