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HoF shareholders poised to agree May flotation

House of Fraser is aiming for a May 2014 return to the stock market, Drapers understands, with the company thought to be in the final stages of negotiations with shareholders.

The department store group, which has already been publicly listed twice before, has been in talks for some months with shareholders including BG Holding, entrepreneur Tom Hunter’s TBH Trading, HoF chairman Don McCarthy and Kevin Stanford, co-founder of Karen Millen and All Saints.

It is thought the potential listing has divided the shareholder base, but a source close to the situation indicated discussions were now coming to a close, with a vote expected to take place soon. Reports have suggested a float could raise £300m, and listing would also aim to simplify the business’s complicated shareholder structure.

The source said: “Flotation would be a sensible solution to resolve shareholder issues that have been there since the collapse of the Icelandic banks [but it will also] allow the business to expand.

“Once HoF has paid down some debt it will be in a stronger position and can drive the business even harder. Growth is being held back by the shareholder base.”

Drapers understands the 61-store business will use a significant proportion of the money raised to pay down some of its £250m debt ahead of its 2018 maturity. The debt will start incurring a £22m annual interest from next year, but this would reduce if HoF bought back some of the bond ahead of its maturity.

The rest of the cash will be ploughed back into the company, which is looking to build on its international expansion following the opening of its first overseas store in Abu Dhabi last week. At the time, chief executive John King said it marked “the first step in our expansion plan for the Middle East”.

HoF is also thought to be looking to expand online both in the UK, where its click-and-collect channel

has been gaining ground, and internationally, which the flotation would also support.

The move to list follows months of speculation that HoF would be bought by Sports Direct owner Mike Ashley, or the Qatar Investment Authority, which owns Harrods.

Founded in 1849, HoF first floated in 1948 and remained a public company until it was acquired by Mohamed Al Fayed in 1985, as part of his acquisition of HoF-owned Harrods. It returned to the stock market in 1994 before being bought again in 2006 by a group of investors led by Icelandic tycoon Jón Ásgeir Jóhannesson’s Baugur Group in a £350m deal.

Nick Hood, business risk analyst at Company Watch, said the listing would present an opportunity for

HoF to “grasp the nettle of straightening out its rather misshapen balance sheet”, noting that potential investors would be cheered by a reduction in its debt, and that this would allow it to “ride

out future retail storms and to take advantage of growth opportunities”.

HoF declined to comment.

Readers' comments (1)

  • How can you value a business that doesn't make any money and is laden with debt? HOF is a failed business. Steer clear.

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