Following the successful first close of its third buyout fund, UK private equity house Permira has submitted a formal offer to acquire UK department store Debenhams in a deal valuing the business at £1.54bn.
UK newspaper reports this morning suggested that Permira was awaiting a response to the 425 pence per share offer submitted to the Debenhams board yesterday evening following the conclusion of due diligence on the business.
Earlier this week, Debenhams reported a 3.8 per cent rise in like-for-like sales in the 20 weeks ended July 19. The better-than-expected results had led some analysts to suggest that Permira may increase its valuation of the business. However, the formal offer has been pitched at the same 425 pence as the indicative offer submitted in May. On May 9, before Debenhams announced the approach, its shares traded at just over 330 pence.
The Debenhams board is currently evaluating the offer and is expected to make a decision by Monday. If the bid is recommended to shareholders, fellow buyout firms CVC Capital Partners and Texas Pacific are expected to launch a rival offer.
CVC and TPG are working with John Lovering, former chairman of Homebase, which was sold by Permira to GUS in November last year. The Financial Times reports today that the two private equity firms are yet to discuss price with the board of Debenhams.
Significantly, Debenhams is currently trading at 430.5 pence per share, suggesting that investors are anticipating further movements beyond the 425 pence offer currently on the table from Permira.
Permira will bid for Debenhams alongside Goldman Sachs and Blackstone Group, and has secured debt financing from Royal Bank of Scotland and Barclays, according to The Times newspaper. It has also agreed to sell 16 Debenhams sites to Royal Bank of Scotland for £330m to help to fund the bid. Stuart Rose, the former chief executive of Arcadia, is also penciled in to become a non-executive director if Permira’s offer is successful.