Warburg Pincus tries on Reiss for size

The firm has acquired a majority stake in the UK fashion retailer in a deal valuing the company at £230 million.

Reiss, a UK fashion chain favoured by the Duchess of Cambridge, has sold a majority stake to Warburg Pincus in a deal valuing the business at £230 million (€290 million; $328 million), according to a statement from retailer.

Warburg Pincus made the investment using capital from Warburg Pincus XII, the firm’s latest flagship fund which closed last November in excess of its $12 billion hard-cap after just six months in market.

Founded in 1971 by David Reiss, Reiss currently operates from more than 160 locations in 15 countries and has a developed e-commerce platform. In the year to January 2016 the company generated sales of £146 million and an EBITDA of £24.4 million.

Together with Warburg Pincus, Reiss is planning further expansion both within the UK and internationally, particularly in North America, Asia and Australia, building on the company’s network in those markets to date and leveraging “Warburg Pincus’ global expertise in working with growth businesses”.

David Reiss will remain as chairman and CEO and will retain a significant investment in the business.

“The business has built an enviable position in its core UK market, with a broad and loyal customer base, and we believe there is a significant opportunity to build on this success and accelerate development internationally,” Warburg Pincus managing director Paul Best said in the statement.

Warburg Pincus Private Equity XII drew commitments from public and private pension funds, sovereign wealth funds, insurance companies, endowments, foundations and wealthy individuals in what is thought to be one of the largest single closes in private equity history, as reported by Private Equity International. LPs in the fund include the Minnesota State Board of Investment, the New Hampshire Retirement System and Washington State Investment Board, according to PEI Research & Analytics.

The firm has already made several investments from the fund, including an investment of up to $500 million in RimRock Oil & Gas, a start-up oil and gas exploration and production company.

Warburg Pincus also has a track record in the retail space. In 2013 the firm exited its investment in luxury goods retailer Neiman Marcus in a $6 billion sale to Ares Management and the Canadian Pension Plan Investment Board. The sale generated a return of more than 2.5x for Warburg Pincus and fellow owner TPG Capital.

In March 2014 Warburg Pincus sold part of its stake in UK-based discount retailer Poundland through a listing on the London Stock Exchange that valued the business at £750 million. The partial divestment generated a 4.5x return and an internal rate of return of more than 50 percent for the firm’s investors, as reported by PEI. It sold a further 35 million shares in the business in February 2015, raising £142 million.