Doughty ‘to double money’ on Umbro IPO

Doughty Hanson, the pan-European private equity firm, has announced its intention to float football clothing and equipment business Umbro on the London Stock Exchange by the end of June 2004.

According to analysts, the IPO is expected to value Umbro at around £200 million, which would represent a return of approximately two times equity invested for the London-based house.

When Doughty Hanson supported a £90 million management buy-in at Umbro in April 1999, the business was making losses. But since 2001, it has increased EBITDA (earnings before exceptionals, interest, tax and amortisation of goodwill) by 180 percent to £20.2 million in 2003, supported by increased turnover and a gross margin improvement of six per cent over the same period.

“Umbro has been transformed over the last five years and is now well placed to benefit from the growing international interest in football,” said Peter McGuigan, Umbro CEO. “We have a clear strategy in place to expand our core business as well as to exploit new identified areas of growth.”

According to a statement accompanying the IPO announcement, Umbro said it had identified four main growth areas: using the Umbro brand to penetrate the $18 billion branded footwear sector; growing its business in the US, the largest sporting goods market in the world; extending the appeal of the brand to more fashion-conscious customers; and taking advantage of the increasing interest and participation of women in football.

Umbro designs, sources and markets football-related apparel, footwear and equipment, and its products are sold in over 90 countries. It currently supplies playing and training kit to international teams such as England and the Republic of Ireland, as well as 150 club sides. 

Umbro will continue to be run by Peter McGuigan, who led the buy-in in 1999 having previously held senior positions at the likes of Reebok, Pentland Group and PMG International. The IPO announcement coincides with the appointment of Dick Barfield as senior independent non-executive director. Barfield is a director of Equitas, the Lloyds run-off reinsurance vehicle, and various investment companies. He was chief investment manager of Standard Life from 1988 to 1996. 

The IPO may deliver a timely boost to Doughty Hanson’s fundraising effort. In September last year, the firm had only raised around €700 million at the first closing of its Doughty Hanson IV fund, which has a €3 billion target. Its previous exit from a portfolio company was also in September 2003 when Italian automotive fluid maker FL Selenia was sold to Vestar Capital Partners for €670 million, delivering a return of around 2.5 times capital invested according to sources. Another portfolio company, Germany’s ATU Auto, has announced plans to float by the third quarter of this year.