WWD.com/fashion-news/fashion-features/u-k-retail-in-play-selfridges-oks-weston-8217-s-1-14-billion-offer-731652
fashion-features
fashion-features

U.K. Retail in Play: Selfridges OKs Weston’s $1.14 Billion Offer

Selfridges’ board formally recommended an offer by Canadian billionaire Galen Weston, valuing the British chain at approximately $965 million.

LONDON — Canadian billionaire Galen Weston is poised to add another jewel to his retail crown: Selfridges.

On Monday, the board of Selfridges formally recommended an offer by Weston’s company Oxford Acquisitions Ltd., valuing the department store chain at approximately $965 million. In addition, OAL plans to assume Selfridges’ net debt of $49 million.

And Selfridges wasn’t the only department store attracting interest Monday. In a further heating up of takeover activity in the once-maligned sector, Debenhams plc said it had received an indicative proposal from the venture capital group Permira, valuing the company at about $2.4 billion. Permira is backing Debenhams chief executive Belinda Earl and her management team, which has offered approximately $6.84 per share for the 90-store chain. Debenhams did not release any further details, and Earl could not be reached for comment.

Weston’s high-end retail holdings include Holt Renfrew in Canada and Brown Thomas in Ireland, while the British side of the Weston family owns London’s gourmet emporium Fortnum & Mason. Galen Weston’s company Wittington Canada, a private holding, also controls George Weston Ltd., one of the largest food processing and food distribution companies in North America.

According to a joint statement issued by Selfridges and Oxford Acquisitions, Weston plans to offer up to $6.33 per share, comprised of $6.24 in cash for each share and a further 9 cents per share as a final dividend for the year.

The offer of $6.33 a share represents a premium of about 60 percent over the closing price of $3.95 on April 8, the last day prior to the start of the bidding process for the retailer. All figures have been converted from the pound at current exchange.

Weston said in a statement that Selfridges sat well within his empire: “There is a good fit between Selfridges’ distinctive approach to the retail experience and Wittington Canada’s considerable experience in finding creative and appropriate ways to grow such concepts,” he said, adding that he planned to work with existing management led by chief executive Peter Williams, who replaced Vittorio Radice earlier this year and who himself was leading a management team interested in buying Selfridges.

Williams could not be reached for comment on Monday as to his plans, but past newspaper reports in Britain indicated he would stay on even if he didn’t win the bidding.
Monday’s announcement came after intense weekend discussions among Selfridges’ nonexecutive directors, their financial advisers Merrill Lynch, and bidders.

“Weston’s was the highest offer we received and we think it’s a very, very attractive deal for shareholders,” a Selfridges spokeswoman said. “Although the decision was made entirely on the basis of price level, we’re also happy that the compatibility between Selfridges and Weston’s companies is there.”

Shareholders will have up to 60 days to sell their shares in Selfridges.

While industry analysts called the offer a good deal for shareholders and a golden opportunity for Weston, another bid could be in the works. Sources say Aletheia Partners, a consortium including the Iranian property tycoon Robert Tchenguiz, may still be preparing a rival, 11th-hour offer. A Tchenguiz spokeswoman declined to comment. As reported, the Formula One motor racing boss Bernie Ecclestone is said to be backing Tchenguiz.

Over the weekend, the Scottish entrepreneur Tom Hunter joined forces with Simon and David Reuben, with a fresh, last-minute bid that fell about 3 cents a share short of Weston’s offer. “I wish Galen Weston and Selfridges every success,” a spokesman for Hunter said, indicating Hunter would not be putting in another bid. Selfridges was Hunter’s third unsuccessful retail takeover attempt this year after his offers for House of Fraser and Allders were rebuffed.

Industry observers said the Weston-Selfridges combination was a hot one.

“I think it was a very far-sighted move on Weston’s part,” said Edward Whitefield, chairman of Management Horizons, the retail consultancy based here. “Selfridges fits into his scheme very well and there are great synergies to be had among the different stores.”

Whitefield added that Selfridges had potential to expand to “at least” 10 stores in the U.K. — and then abroad. “Selfridges is a brand emporium and the brands they carry have an international appeal. I definitely think there are opportunities outside the U.K. for the company.”

Since Selfridges was demerged from Sears plc in 1998 and floated on the London Stock Exchange, trading space has increased to 807,000 square feet from 540,000 square feet. Selfridges currently has its flagship on Oxford Street, and two units in Manchester. Its new Birmingham store will open in September, and plans are in the works for a Glasgow unit. The company also said in its statement Monday that other “targeted” cities include Leeds, Newcastle and Bristol.
Whitefield added that Selfridges may also serve as a vehicle for Weston to buy other department stores: “It may be a vehicle of consolidation. He may look to House of Fraser, for example, and expand Selfridges that way.”

Indeed, industry observers agree that the publicly quoted House of Fraser will likely be next on investors’ lists, and may well be the target of a management buyout. “There’s room to expand that business, and management would probably love to do it without interference from the financial world,” said Maureen Hinton, a senior retail analyst at Verdict Research, a consultancy based here. And Weston already has at least a partial link to House of Fraser — Andrew Jennings, chief executive of Holt Renfrew, once ran the 53-store U.K. chain, which had sales last year of $1.55 billion.

So why all the interest in British department stores now? The simple answer appears to be return on investment. “Selfridges is a very profitable business right now,” said Whitefield of Management Horizons. “If Weston had put his millions in the bank, he’d be getting a 6 percent return on it. At Selfridges, he’ll get more than that.”

Selfridges shares closed today at $6.40, up 11.95 percent from the previous day's close. Debenhams shares closed at $6.60, up 23.73 percent from the day before.