Shares in Next, a UK clothing retailer, have soared to an all-time high amid rumours that it could be the next high street chain to be targeted by private equity.
Next’s share price hit a record £23.20 yesterday, up 92 pence, before eventually closing at £23.02, up 3.3 percent for the day. The run continued this morning, with shares up a further 64 pence to £23.66 by 08:45 GMT.
The heavy trading followed unsubstantiated rumours of a possible £25 per share offer, which would value the company at about £5.7 billion (€8.4 billion; $11.2 billion). The retailer last week reported better-than-expected trading results, causing analysts to revise their valuations of the company upwards. Deutsche Bank even valued the business at £26 per share.
Unlike retailers Alliance Boots and Sainsbury’s, Next does not own much freehold property, reducing its value and making it harder for buyout firms to finance any potential bid.
The Next speculation comes in the wake of private equity interest in two of the other biggest names on the UK high street. Kohlberg Kravis Roberts has teamed up with Stefano Pessina to offer £10 billion for Alliance Boots, a health and beauty chain, while a consortium led by CVC Capital Partners is reportedly preparing a bid for supermarket chain Sainsbury’s.
Further potential suitors for the two chains could also emerge. Media reports have suggested that Terra Firma, the investment group run by Guy Hands, may yet submit a rival bid for Alliance Boots, while another buyout consortium – including US firms Bain Capital and Apollo Management – is considering an offer for Sainsbury’s.
Other reports today have suggested today that Asda, Britain’s third biggest supermarket chain, could yet derail any private equity bid for Sainsbury’s. Asda, which is owned by US chain Wal-Mart, is reportedly talking to the EU Competition Commission about whether antitrust issues would prevent it from launching its own takeover bid. Separately, the London-based Times newspaper reports that property tycoon Robert Tchenguiz has increased his stake in Sainsbury to about 4.5 percent, and may look to help the company realise more value from its £7.5 billion property portfolio.