Permira, Apax net £780m on New Look

The European buyout firms are selling the high street fashion chain after 11 years of ownership

Permira and Apax Partners have agreed to sell their combined 90 percent stake in high street fashion chain New Look to South Africa-based investment company Brait in a deal valuing the chain at around £1.9 billion (€2.6 billion; $3 billion), according to a statement from New Look.

Brait will acquire the stake in New Look Retail Group for around £780 million (€1.08 billion; $1.23 billion). The Singh family interests and current management will acquire the remaining ten percent. Entrepreneur Tom Singh founded the New Look chain in 1969.

New Look’s chief executive Anders Kristiansen, chief financial officer Mike Iddon and chief creative officer Roger Wightman will remain with the Company, the statement said.

The sale will generate a 4.3x return for Permira and a 4.4x return for Apax, according to sources with knowledge of the transaction.

Permira and Apax declined to comment on returns.

New Look has net financial debt of around £1 billion. Brait and New Look’s management team are “comfortable” with the current leverage ratio, given the business’s “strong cash flow generation”, according to the statement. Depending on market conditions New Look will “review financing alternatives in order to optimise the capital structure within the same leverage range”.

Permira and Apax acquired New Look in a public-to-private transaction in 2004. Permira invested using its Permira Europe II, a 2000-vintage €3.46 billion vehicle. Apax backed the deal using its 1999-vintage Apax Europe IV, a €1.8 billion vehicle, and its €4.4 billion Apax Europe V, a 2001-vintage. It is understood that the firms had roughly equal stakes in the business.

As at the end of March 2015 Permira Europe II was valued at 1.7x, it is understood. There is one asset, Spanish clothing retailer Cortefiel Group, remaining in the vehicle.

Under the firms’ 11-year ownership New Look’s sales and EBITDA have almost doubled and it has expanded internationally, opening its first 19 stores in China. The chain has also developed its e-commerce platform, which today serves more than 120 countries and generates 15 percent of total sales.

It is understood that Apax has realised just over $12 billion of equity since the beginning of 2014. In April the firm netted a 5.5x return on the sale of Italian bank Banca Farmafactoring to Centerbridge Partners, and booked a 2x return on its sale of mobile phone operator Orange Switzerland for CHF 2.8 billion ($2.9 billion; €2.3 billion) last December.

The firm is currently investing Apax VIII, which closed on $7.5 billion in 2013. It is understood that just over half of the fund has been invested.

New Look is the second fashion retailer that Permira has sold this year. In March the firm sold its final stake in German fashion group Hugo Boss. The overall return for Permira on the investment was 2.3x.

Permira is currently investing Permira V, a €5.3 billion vehicle which held a final close in June 2014. Investments in the fund include shoemaker Dr Martens, wealth manager BestInvest, vitamin company Atrium, online legal services provider LegalZoom, agrochemicals business CABB, and remote software company TeamViewer.

Global law firm Linklaters advised Brait on the New Look acquisition after also advising the firm last month on its acquisition of an 80 percent stake in Virgin Active from CVC and Virgin.