Signet Group, a UK-based jewellery retailer, could oppose a take-private bid by private equity firms Apax Partners and Kohlberg Kravis Roberts.
In a letter to the Financial Times, Alistair Mundy, a fund manager at Investec, which holds around a two percent stake in Signet, referred to concerns that private equity firms buy public companies too cheaply before taking them private, maximising their value through refinancings and asset sales before returning them to the public markets.
Apax and KKR released a statement last week confirming that they had “jointly undertaken a preliminary analysis of the company and that their analysis included the consideration of a possible offer for the company”. At the time, the private equity firms were reported to be considering a £2.3 billion (€ 3.4 billion) bid for the company.
Signet Group shares were trading at 113.75 pence at 10am BST today, giving the business a market cap of £1.741 billion.
Neil Darke, a director at Collins Stewart, said that a bid of around 125 pence per share probably “still wouldn’t cut it” with institutional investors, but pointed out that a number of recent deals, such as De Vere Group and ABB Ports had seen bids go higher than analysts had initially predicted.
However, public shareholders feel that reducing working capital and maximising value for assets is not exclusively the domain of private equity firms, added Darke.
The Centre for Management Buyout Research, in association with Barclays Private Equity and Deloitte, reported in March that a number of failed public-to-private bids by private equity firms had dented UK buyout figures in the first few months of the year.
Tom Lamb, co-head of Barclays Private Equity, told PEO at the time that private equity firms had become a victim of their own success. “There is the embarrassment factor of recommending selling the company and then two years later finding out it was you that got mugged as the new owners have doubled profits, got their money back and are now looking at a flotation. Nobody wants to be the corporate M&A equivalent of the man who turned down the Beatles.”