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Pets at Home, ISS and Poundland set to float

The new offerings by KKR, Warburg Pincus and Goldman/EQT highlight the recovery of Europe’s IPO market.

Kohlberg Kravis Roberts is preparing to divest approximately 25 percent of pet products retailer Pets at Home, via an initial public offering on the London Stock Exchange.

The flotation is likely to value the business at about £1.5 billion and generate proceeds of approximately £275 million. Coupled with a new £325 million senior facility, that will allow the business to repay all of its outstanding existing senior facilities, according to a Pets at Home statement. Net debt would then stand at about £275 million or approximately 2.5x net debt of the underlying EBITDA of £110.2 million forecasted for March 2014.

KKR acquired Pets at Home in 2010 for £955 million, a deal that netted its previous private equity owner Bridgepoint a 8x return.

During KKR’s ownership, Pets at Home has continued to grow. The company, which has 369 stores, had a compound annual growth rate of 2.6 percent between 2008 and 2012, with no years of negative growth and outpacing the broader UK retail sector over the same period. It estimates this market to be worth some £5.4 billion, “supported by a stable UK pet population”, according to a statement.

POUNDLAND TO CASH IN

The planned IPO comes just after Poundland, which is owned by Warburg Pincus, also announced its intention to float on the London Stock Exchange. The IPO will take place in March, and is likely to value the UK discount retailer between £700 million and £750 million.

Warburg will sell at least 25 percent of its shares in the IPO, according to a Poundland statement. The firm bought the business in May 2010 from Advent International; it invested £200 million in an all-equity deal via Warburg Pincus Private Equity X, a $15 billion global private equity fund, PEI reported at the time.

Under Warburg’s ownership, Poundland has enjoyed an annual compound annual growth rate of 17 percent. Revenues grew to £880.5 million in the 2013 financial year from £641.5 million in 2011. In September 2011, Warburg supported the company’s entry into the Irish market with the launch of Dealz, where Poundland sells the majority of its products for €1.49, compared to £1 in the UK.

“The value retail sector has been through a period of profound change in scale, customer perception and financial performance. The sector is now a mainstream feature of the UK retail market and Poundland has been a central architect of that change,” Jim McCarthy, CEO of Poundland, said in the statement.

The business has also bolstered its board of directors by appointing a few retail veterans. They include Tea Colaianni, group human resources director at Merlin Entertainments, the entertainment group that The Blackstone Group partially exited last year in a £.3.2 billion IPO – the largest sponsor-backed IPO in Europe in 2013, according to CMBOR.

ISS FINALLY EYES EXIT

Completing the trio is ISS, a Danish facility services company owned by EQT Partners and Goldman Sachs Capital Partners, which also announced plans to go public – this time on the NASDAQ OMX Copenhagen stock exchange.

The IPO, in which Goldman and EQT will sell down part of their stakes in the business, is expected to raise proceeds of approximately DKK 8 billion (€1.07 billion, $1.47 billion), according to a ISS statement.
Ontario Teachers’ Pension Plan and KIRKBI Invest, the family office behind the LEGO toy brand, which also own part of the business, do not plan to sell any shares in connection with the IPO, ISS said.

The IPO will be a relief for EQT Partners and Goldman, who bought ISS for around €3.1 billion in 2005 and have been trying to exit the business for some time. The firms first considered an IPO in 2007, but cancelled this due to turmoil in the financial markets. They almost sold it to Apax Partners in 2011 for $8.5 billion, but that deal collapsed. Then in 2012, a proposed £5.2 billion (€6.8 billion, $8.1 billion) sale to trade player G4S failed following opposition from G4S’s shareholders. EQT and Goldman have since sold a minority stake in the business to OTTP and KIRKBI.

The recent listings are a further sign of the revival of the European IPO market. In 2013, the value of IPO exits reached a record €25 billion from 20 IPOs, up from just one IPO of €3.7 billion in 2012, according to CMBOR.