US private equity firms TPG and Warburg Pincus are targeting fashion retailer New Look, which current private equity owners Apax Partners and Permira are auctioning for up to £2 billion ($4 billion, €2.9 billion).
The decision of the two buyout firms to work together on the deal came after several approaches by various potential bidders to the company.
US banker Merrill Lynch opens the auction of the retailer in a few days, yet the sellers are likely to be disappointed that such big firms are willing to team up on the deal as it may lead to less competition for the company.
Other likely bidders include US buyout groups The Blackstone Group and KKR as well as European firms CVC Capital Partners and Cinven. It is believed that a bid for the powerful consortium of TPG and Warburg Pincus may dissuade some of these companies from making an offer.
Apax and Permira appointed Merrill Lynch to advise on a flotation or secondary sale in February. Yet the buyout firms decided against the float, in part because of the poor performance of ex-private equity retailers such as Debenhams.
The firms also eschewed an IPO because there had been much private interest in the company before the sale.
In the private equity firms’ ownership of New Look they have
pursued a rapid aggressive growth strategy as opposed to the repositioning
and rebranding of Debenhams.
Sales at New Look reached £1 billion in the year to March 2007, an 18 percent increase on the previous year, and that profits at New Look rose from £174m to about £180m.
The private equity firms took New Look private for £700 million in 2004 and the retailer is run by chief executive Phil Wrigley. The firms refinanced the business twice during their ownership, doubling their initial investment.
TPG was the largest investor in the consortium which took over Debenhams in 2003 and it also owns Australian department store Myer.