B&M IPO: Discount retailer to launch £2.9bn share listing

Valuation to position company just outside FTSE 100

B&M IPO: Discount retailer to launch £2.9bn share listing

iNVEZZ.com, Saturday, May 31: British discount retailer B&M is to be valued at up to £2.9 billion in its planned initial public offering (IPO), making it one of the biggest UK retail listings of the year.

According to inside sources, cited by several major newspapers yesterday, the chain is to set its flotation price range at between 230p and 290p a share, giving the company a market value of between £2.3 and £2.9 billion. The valuation also gives B&M a multiple of 22-27.7 times the firm's forecast earnings to March 2015, the sources noted.

B&M, which sells household goods, toys, furniture, clothes and non-perishable food, had revenues of £1.3 billion last year and posted earnings before interest, tax, depreciation and amortisation of nearly £113 million. A float price at the top of the range would make the stake of Simon and Bobby Arora, the two brothers who bought the chain 10 years ago, worth £1.1 billion and position the company just outside the FTSE 100 index of Britain's largest companies. If the offer is priced at the middle of the range, the brothers' stake would be worth £1 billion.

B&M’s US private equity backers, Clayton, Dubilier & Rice, who own the remaining 60 percent , will see the value of their stake more than treble after buying into the group in 2012 at a £1 billion valuation.

B&M’s flotation is being run by Bank of America Merrill Lynch and Goldman Sachs. Between 25 and 40 percent of the chain’s shares will be freely traded after the listing and the final price is expected to be set on 11 June, with dealings starting the day after.

Leahy stock market return amid challenging backdrop for retail IPOs

B&M’s planned flotation would mark a return to the stock market for Sir Terry Leahy, who stepped down as Tesco’s (LON:TSCO) CEO in 2011 and is currently non-executive chairman at the discount retailer.

Leahy left Tesco on a high after a sparkling 14-year reign typified by worldwide expansion. However, the failure of his initiatives since his departure and a scathing attack by predecessor Lord MacLaurin last year have taken the gloss off his tenure.

His return to the stock market comes as the backdrop for retail IPOs becomes increasingly challenging. UK retailers are pressing ahead with their offerings as the market for flotations cools down from the frenzy in the first few months of the year.

Clothing retailer Fat Face pulled its float last week because fund managers rejected the £440m valuation placed on the casualwear store chain by its private equity owners. Card Factory (LON:CARD), Pets at Home (LON:PETS) and Just Eat (LON:JE) have all fallen below their IPO prices since the companies sold shares in the last three months. Poundland (LON:PLND), B&M’s discount rival which floated two months ago, has performed better than many of its newly floated peers and is still trading above its float price.

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