Buyout firms Permira and Apax Partners’ auction of UK retailer New Look has collapsed after the consortium of buyout firms BC Partners and Warburg Pincus pulled out of the bidding on price grounds, according to a source close to the deal.
The buyout firms failed to agree over the valuation of the retailer – Apax and Permira were reportedly seeking as much as £2 billion (€3 billion; $4 billion) and had set the reserve price at £1.8 billion, according to a banking source. However, none of the prospective bidders – which had also included TPG in the consortium and The Blackstone Group, KKR and CVC Capital Partners according to reports – were willing to pay more than £1.7 billion, given the current climate.
A source close to the auction said: “The negative outlook for the retail industry during the protracted sale process has not changed, and with interest rate hikes on the way market conditions haven’t been conducive to raising bids at the price sought by the vendors.”
The gulf between what the bidders were prepared to pay and the price the sellers were willing to accept became sharper as the auction went on, he added.
The buyout firms originally eschewed a flotation because there had been much private interest in the company before the sale, a source close to the sale process said a few months ago when news of the auction first surfaced.
Exits from UK retail companies via the public markets have been more difficult for private equity firms since the disastrous return to the market of department store chain Debenhams last year. CVC, Apax and Merrill Lynch made a huge profit from their period of ownership, but the company’s share price has plummeted by around a third since it was re-floated last year.
However, a market source insisted the two situations were not comparable – New Look’s private equity owners have pursued a rapid aggressive growth strategy, as opposed to the repositioning and rebranding undergone at Debenhams, he said
But the banking source was sceptical about a revival of the flotation plans: “The firms are unlikely to consider that exit route – the deal may yet be rescued or the firms will carry out a recapitalisation and hang onto the company for longer.”