Debenhams IPO Priced At Bottom Of Range

Debenhams has returned to the stock market less than three years after being bought by private equity backers CVC Capital, Merrill Lynch Private Equity and Texas Pacific Group. The price range of the IPO on the London Stock Exchange priced at 195 pence per share, the very bottom of the anticipated price range, which was set at between 195 and 250 pence. The IPO gives the company a market capitalization of £1.675 billion ($3.13 billion).

CVC Capital, Merrill Lynch Private Equity and Texas Pacific sold 487m shares, almost 57% of the business and reportedly raised £950m.

Each firm took a 30% stake in Debenhams when it was taken private in 2003 for £1.7 billion. The business had been the subject of a highly competitive bidding process in which a consortium led by Permira was also bidding with a recommended £1.54 billion cash offer.

When TPG, Merrill Lynch and CVC first got involved in the auction for Debenhams in 2003, the consortium was led into the bidding with €8.5 billion inducement fee.

At the time of the deal, TPG Partner Philippe Costeletos told Buyouts, “Before we entered the process, there was little incentive for Permira to revise its price, even though some institutional shareholders were expressing concerns… But given how far ahead the competitors were in the process, we couldn’t justify going out of pocket with the diligence costs, so we asked to be compensated for it.”

Following the IPO, the private equity firms each retained significant shareholdings in the business post-IPO and will commit to not sell any of their remaining holdings for at least 180 days. – A.S.