House of Fraser’s floatation: third time lucky?

ANALYSIS_ House of Fraser is reportedly set to try its luck again on the stock market, having been listed twice before. The British department store chain first floated in the London Stock Exchange in 1948 and remained

 a public company until Mohamed al-Fayed bought it in 1985.

The company eventually floated again earlier this decade, before it was acquired by Islandic Baugur Group in 2006. Seven years later, the fashion house is said to have appointed financial advisors to go public for the third time.

As widely reported by financial media in the UK this week, House of Fraser is sticking to its IPO plan – revealed in August – and will soon announce the appointment of investment bank Rothschild to manage the floatation. As per sources quoted by the ‘Financial Times’ and previously the ‘Telegraph’, the floatation is expected to materialise during the first quarter of 2014. In the meantime, Rothschild is allegedly shortlisting other advisers to help with the share sale.

The potential initial public offering is expected to value the retailer at circa 350 million pounds, almost the same price that Iceland’s Baugur Group paid for the apparel retailer in 2006. Other market sources, more optimistic, point out at an IPO value of up to 450 million pounds.

House of Fraser to go public for the third time

Sources close to the matter explain that a factor that has delayed the floatation in the last years is the company’s complex shares structure. Since Baugur Group went into bankruptcy in 2009 and placed its UK arm into administration, 49 percent of House of Fraser has been under the control of representatives of failed Icelandic including Landsbanki.

Other 20 percent of the department store chain remains in the hands of the chairman Don McCarthy and his family, while retail entrepreneurs Sir Tom Hunter and Kevin Stanford come as the next major stakeholders with 11 percent and 10 percent of the company, respectively.

In the past, sound tenders such as Sports Direct or the Qatari royal family’s funds failed to progress with their interests because of this complex shares arrangement.

The group – which employs 7,300 people and was taken private in a 350 million pounds buyout led by Iceland’s Baugur Group in 2006.

As per the information published by CITY AM, House of Fraser would have accelerated its plans for a listing on London’s stock market in the first quarter of 2014 after appointing Rothschild as advisers.

General understanding in the City is that the apparel group – which generated underlying profits of 61.1 million on sales of 1.2 billion pounds in the year to January 2013 - is expected to do the road show with banks in the run-up for Christmas to co-ordinate and run a share offering, with plans to float the company after the festive trading season figures are unveiled.

The float could raise upwards of 350 million pounds and comes on the back of a mini-frenzy in London’s new issues market which has seen firms like Merlin Entertainments, Royal Mail and Infinis roar away to successful initial public offerings.

House of Fraser is 20 percent owned by chairman Don McCarthy, with the majority – 49 percent – owned by a host of Icelandic banking figures.