Enterprise Investors, Central Europe’s largest private equity firm, has taken a 13 per cent stake in LPP, the Polish fashion retailer which listed on the Warsaw Stock Exchange in May 2001.
Enterprise has paid $13.6m for the 13 per cent interest, acquired through an equity increase in the business as well as the acquisition of shares from British investment fund Grangefont.
LPP designs and sells clothing through a retail network of 54 stores in Warsaw, Moscow, Budapest, Prague and other major cities in the CEE region. LPP reported total revenue of $65m and net profit of $4.75m in 2002. In the first quarter of this year, the business had sales of $4.25m, 75 per cent up on the same period in 2002.
The company has raised $13.3m of equity through the sale of new shares in order to continue its expansion with a plan to double the number of stores within two years. Analysts estimate that the Polish clothing market generates sales of approximately $3.5bn to $4bn annually. The market is fragmented, with very few chains numbering more than five to ten stores. LPP, which operates through its “Reserved” brand, is by far the largest fashion retail chain in Poland.
Jacek Siwicki, managing partner at Enterprise Investors, said LPP had the ‘potential to become a regional leader in its market’. “Due to our retail experience we should be able to help the management develop the company further. The advantage of investing in a listed company such as LPP, which is undergoing a strategy of expansion, is that there is greater transparency and improved liquidity for our investment.” The rights issue was heavily oversubscribed by Polish institutional investors.
Funds managed by Enterprise Investors have invested over $650m in almost 90 companies across all economic sectors in Poland and Central Europe. In March, the firm invested $8m in Magellan, a Polish company which buys the outstanding debts of public healthcare units from primary creditors at a discount and then restructures and collects the debt for a profit.