Target: Topshop and Topman
Price: $563 million
Sponsor: Leonard Green & Partners
Seller: Arcadia Group
British retail billionaire Philip Green has sold a 25 percent stake in Topshop and Topman to a U.S. private equity firm for £350 million ($563 million) to help accelerate the chains’ overseas expansion, sister news service Reuters reported. Green’s Monaco-based Arcadia Group said on Thursday the stake had been sold to Leonard Green & Partners following a courtship lasting several months.
Philip Green told Reuters that Leonard Green was paying the money for the quarter interest in the newly formed entity Topshop/Topman Ltd, which is able draw on £600 million of debt—but has not yet. “We’ve received £350 million and we can draw another £600 million … We don’t need that money today,” he said, adding the two parties valued the new entity at £2 billion.
The deal is Philip Green’s most significant since he failed for a second time to buy Marks & Spencer in 2004. Leonard Green, whose other investments include U.S. fashion retailer J. Crew and department store chain Neiman Marcus, would not be involved in the management of Topshop and Topman.
“They’re totally hands off, they’re a financial investor, will help us with anything we want help with. They know the American market, know all the people we need to know,” said Philip Green. “Everybody’s always saying what a graveyard America is for British retailers. They’ve been exceptionally successful and they said, ’We’ll buy a corner and we’ll help you develop’.”
Philip Green said Leonard Green’s investment was locked in for a minimum of five years. He declined to comment on what the private equity firm’s exit strategy might be. “This is day one of the romance,” he said.
The funds received from Leonard Green mean Arcadia, which also owns Bhs, Burton, Dorothy Perkins, Miss Selfridge, Wallis and Evans, is now debt free, having ended its 2011-12 year with debt of £309 million. “Being debt free gives us the balance sheet and flexibility to look at other opportunities to consolidate or acquire, either on our own or in partnership with LGP,” it said.
Philip Green bought department store chain Bhs for £200 million in 2000 and Arcadia (including Topman and Topshop) for £850 million in 2002. He has said he is not averse to doing another major deal if the right one crossed his table.
Last month Arcadia reported a 25 percent rise in 2011-12 pretax profit.
James Davey is a correspondent for Reuters in London.