KKR, the firm whose 1980s takeover activities inspired the Barbarians at the Gate book, owns about 85% of Pets at Home, which set a valuation of up to £1.3bn for its stock market listing on Friday. Up to 40% of the company will be offered to new shareholders, while KKR will retain a stake of between 60% and 75% that could be worth up to £975m. The private equity firm bought its majority stake just four years ago when the retailer was valued at £995m.
Warburg Pincus, the US private equity fund behind Poundland, is also in line for a big pay day after the company set the price range for its shares at 250-300p. That translates to a stock market value of £625m-£750m. The New York-based firm intends to sell almost half of its 76% stake, which at the top end would be worth £570m. It paid £200m for Poundland in 2010 and is looking to sell 45% of its holding – although that figure could rise if the IPO is oversubscribed. No new shares are being issued.
The rest of the equity is owned by Poundland's top 155 managers, although the majority is in the hands of nine directors, including chief Jim McCarthy.
Pets at Home and Poundland are riding on a wave of retail stock market flotations. Convenience store operator McColl's formally listed yesterday at a value of about £200m, while online Kitchen appliances retailer AO World saw shares soar in initial trading earlier this week when it achieved a heady £1.2bn market capitalisation.
Online fashion store Boohoo.com also confirmed its plans to join the junior Aim market on Friday. The business is expected to be valued at about £500m on joining the market later this month, when it hopes to raise about £100m from new investors. The valuation would crystalise a fortune for the Kamani family, which own the majority of the business along with cofounder Carol Kane.
Documents released on Friday revealed that Pets at Home shares will be priced at between 210p and 260p each, implying a market capitalisation of between £1.05bn and £1.3bn when the company lists on the stock market on 18 March. The top end of that range would be slightly above the £1.2bn previously anticipated, handing a potential cash and shares fortune of £130m to 500 staff – an average of £260,000 each – who own a 10% stake in the business.
About 15% of shares will be offered to the public and Pets at Home staff, who have the opportunity to apply for parcels of shares worth between £250 and £750. The rest will go to institutional investors.
About £280m in proceeds from the issue of new shares will go to pay down debt, leaving the company with £275m of debts on admission to the stock exchange.
Analysts said the flotation had all the usual hallmarks of a private equity-backed flotation, which are regarded with suspicion in the City.
Tony Shiret, an analyst at Espirito Santo, said the listed company would have a high level of debt once property rents were included. "Investors need to work out if this is a private equity wolf in a cuddly puppy dog's clothing. At the bottom end of the range it looks expensive and at the top end it looks really expensive."
However, Nick Wood, chief executive, said the listing would provide Pets at Home with funds to support its next stage of growth.
He said: "We have multiple growth opportunities, including growing the number of Pets at Home stores to over 500, the roll out of Vets4Pets and the Groom Room to our customers, the further growth of our omnichannel offering and enhancing the relationship with our customers through our VIP loyalty programme."
Online Indian fashion retailer Koovs, which is led by former ASOS chairman and Labour peer Lord Waheed Alli, also completed its book building last week, raising £22m in an offer that was twice-subscribed, giving it a market capitalisation of about £36m when it floats on the junior Aim market around 10 March.
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