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Buyout firms walk away from £3bn Shop Direct

Business & Economy 02 Jun 2017
Buyout firms walk away from £3bn Shop Direct

Buyout giants fail to click on £3bn Shop Direct sale

CVC and Carlyle have decided against bidding for the Barclay brothers' retail empire, Sky News learns.

Image: Shop Direct includes Littlewoods and Very

By Mark Kleinman, City Editor

Some of the world's biggest buyout firms have walked away from potential bids for Shop Direct, the online retailer, amid concerns about its reliance on revenues from a vast consumer credit arm.

Sky News has learnt that a number of private equity groups which held initial talks with Shop Direct's advisers decided not to bid ahead of a deadline for initial offers this week.

The firms which are understood to have opted not to submit bids include Carlyle and CVC Capital Partners, according to bankers close to the process.

The news comes as the Barclay brothers – the reclusive twins who own the Daily and Sunday Telegraph newspapers, and the Ritz hotels – explore a sale of Shop Direct for the first time since they acquired Littlewoods 15 years ago.

Insiders say they are targeting a £3bn-plus price tag for the company, which also owns the Very brand, although people close to the brothers insist that they have not set a formal price tag during talks with bidders.

Other firms which have also held talks with Shop Direct's management include Advent International, Bain Capital, BC Partners‎, Cinven and Permira, although it was unclear on Thursday which – if any – of these had tabled formal bids.

One City source said the company was "comfortable" with the level of investor interest.

However, some analysts believe that increasingly onerous regulation of consumer finance activities will deter private equity firms from paying a premium price for Shop Direct, which is among the biggest retail providers of credit in the UK.

Bankers say that uncertainty about consumer confidence during and after the Brexit negotiation process has also dampened enthusiasm to buy the company.

They say the owners may ultimately restructure the sale process and seek to offload a minority stake in the business, rather than full control.

Shop Direct was one of the big‎ winners in the retail sector during the crucial Christmas trading period,‎ posting a 9% rise in sales during the seven weeks to 23 December.

It has benefited from growing demand for fast fashion and the explosion in retailing on digital channels.

Nearly two-thirds of its sales are now derived from mobile devices, underlining the departure from Littlewoods' mail order and high street past.

The Littlewoods catalogue was closed in 2015.

Last year, Shop Direct reported underlying profits of more than £150m, a figure which is expected to show substantial growth again, with revenues expected to breach the £2bn barrier for the first time in the coming years.

Shop Direct's other brands include VeryExclusive, which offers high street premium fashion labels such as Vivienne Westwood, Marc by Marc Jacobs and Reiss.

A Shop Direct spokesman declined to comment, as did the private equity firms and UBS, the bank running the sale process.

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