New Look sets early date for flotation but is open to bids

FASHION retailer New Look yesterday set an early spring date for a flotation on the London Stock Exchange, which could set a trend for others to follow.

But management also left open a window for private buyers, saying they would consider a sale of the company if bids were high enough.

New Look's initial public offering (IPO), scheduled for mid-March, would raise 650 million, potentially valuing the chain of shops at 1.7 billion to 2bn. The firm, owned by venture capitalists Permira and Apax Partners, said the proceeds will be used to pay down debt and position it for further growth.

IPO markets are showing signs of picking up across the world as a tentative economic recovery encourages private equity firms to seek exits from investments held over many years.

Travelport, the Blackstone-backed owner of the Galileo airline booking and hotel business, is seeking a valuation of up to $3.45bn (2.16bn) when the New York-based firm lists on the LSE in the first quarter. A 3.2bn pipeline of floats is also thought to include Merlin, the owner of Madame Tussauds and Alton Towers; retro fashion retailer Supergroup; grocery delivery business Ocado and education technology company Promethean.

But the recent sale of private-equity backed Pets at Home in a 1bn deal last week also suggests the market for buy-outs is warming up.

Carl McPhail, chief executive of New Look, confirmed the board's intention to float.

"There isn't a dual process as far as we're concerned. We're working towards an IPO and that's the decision the board has made," he said, though he added that the group would consider offers if they were high enough.

McPhail estimates the flotation will cut New Look's 1.1bn debt to a more manageable 450m. But investors remain wary.

New Look in particular faces a challenge to overcome disillusion created by the IPO of department stores group Debenhams, which was floated by private equity owners in 2006 laden with debt and has seen its shares plunge since.

McPhail underscored the differences between New Look and Debenhams, arguing investors have put 450m in the business since taking it private in 2004, adding the group had doubled in size in that time and would continue to do so.

New Look has achieved a compound annual growth rate of 11 per cent over the past five years, compared with 5.4 per cent for budget clothing retailers and 1.5 per cent for all clothing retailers, he added.

New Look reported a 5.9 per cent rise in sales at UK shops open at least a year in the 14 weeks to 2 January, outperforming rivals Marks & Spencer and Next.