Retail purchase, but who puts their hand in their pocket?
Depressed corporate valuations may lead to a buyer’s market and the retail sector is starting to see the vultures flocking.
“Valuations in consumer-related sectors are quite depressed, given the pricing in a recessionary environment,” said John Stevenson, retail analyst at Peel Hunt.
“If you look at the sector as a whole, valuations are fundamentally attractive if you look at them over a three to five year horizon,” he added.
This would explain to us why there has been a flurry of takeovers and acquisitions of minor stakes in the retail sector, but who is buying?
Frasers buys stake in N Brown
Mike Ashley’s Frasers Group continued its stake-building spree, taking 4.54% in N Bown.
Behind brands like Simply Be and Jacamo, Manchester-based N Brown reported lower revenue and profit last week due to declining consumer confidence.
It is the latest step in a long series of purchases, which includes I Saw It First, an investment in Hugo Boss and a £20million acquisition of the assets of Missguided, as it seeks to open up channels additional income.
Apart from that, he continues to pursue a deal for Australian fashion marketplace MySale, although attempts have so far proven unsuccessful.
According to a Sky News report, Frasers is also reportedly considering a deal for failing Matalan, despite apparently being well behind in that race.
Acquisition of Matalan
Elliot Advisors, the prominent activist investor with stakes in GSK and Avant Homes, to name a few, is reportedly working with Matalan founder John Hargreaves to fund a bid for the company.
Hargreaves founded the Liverpool-based business in 1985 and is struggling to secure a deal for the fashion and homewares retailer, which is weighed down by £350m debt it must refinance by now January if he wants to stay afloat.
US investment firm Elliot, founded by Wall Street tycoon Paul Singer, is known for aggressively pushing for strategic and management change.
More recently, he tried unsuccessfully to push through changes at GSK, Taylor Wimpey and SSE.
Doncaster car dealer takes stake in Joules
Perhaps one of the most surprising deals is that of Doncaster-based Richard Teatum, owner of Stoneacre Motor Group, who acquired an 8.9% stake in Joules worth almost £1m sterling.
Next recently pulled out of a £15m deal to buy the clothing company, opening the door for any potential builder to enter.
Joules and its 130 stores across the country announced this week that they are considering a restructuring from their creditors due to financial difficulties that have plagued the business.
The Teatum millionaire, who owns around 100 dealerships employing around 3,000 people across the country, told the Retail Gazette that he “could buy some other stock, I could sell some other stock”.
“I think the stocks have very good value, otherwise I wouldn’t have bought them.”
“I think the business can be turned around, not easily, but it can be.”
Teatum added that he is “diving” into the stock market, despite this being his first investment in a clothing retailer.
A shopping-hunting fashion retailer, an investment firm, and a car dealership that all dive into retail tell you everything you need to know about who’s making the purchase.
Anyone and everyone who thinks there is value in current market conditions.