Sir Philip Green is likely to put Moss Bros Hire into his Burton chain if he goes ahead with a full bid for the menswear retailer.
It is understood that Green believes the hire business is a good bet in a downturn, although Burton already has a hire concession partner in more than 250 of its stores. It would bring margin benefits for both Burton and Moss Bros.
The hire market has been the jewel in the crown at Moss Bros, consistently posting sales uplifts while the core business has seen sales slow, largely because of price deflation.
As Drapers went to press, Green spent £6.7 million on a 28% stake in Moss Bros from investment company Baugur via the Green family investment firm Warbeck. He said he was considering making a full offer for the menswear business, but also said there was no guarantee of a full offer.
The move by Green has set the industry alight with speculation about further consolidation within the men’s formalwear sector. One source said: “You have to ask yourself why Green is bothering to buy a stake in a £100m business?”
Others felt that any potential deal must be part of a bigger move on the menswear sector. One said: “A Burton and Moss Bros merger would make sense but there could also be a longer end game in this if Austin Reed came into play too.”
Sources close to Moss Bros told Drapers that there were huge potential cost savings in a merger of Burton’s and Moss Bros’s head offices. One said: “Green would look to take out costs and make it slimmer.”
A deal would also give Green the second largest share of the suiting market after Marks & Spencer, bolstering his buying power. Another source close to Moss Bros said Green would be keen to keep the company’s Hugo Boss franchise business. A bid by Green would be the third attempt to delist Moss Bros in the past two years.
Investment firm Baugur made two failed attempts to buy Moss Bros. The most recent bid was earlier this year, when it offered 42p a share for the company, creating a furore
with family shareholders and prompting womenswear and homeware retailer Laura Ashley and menswear chain Greenwoods menswear to begin stake-building in the business.
It is unclear whether leading shareholders would support a Green bid, but one said: “There is a 30% holding that won’t sell unless the price is over 50p.”
However, a second source pointed out that Green would only need 51% to effectively take control of the business.
Moss Bros chief executive Philip Mountford is on record as saying that because the business is relatively small, it would be better run as a private concern and that the management team have struggled to formulate a solid strategy to carve out a niche positioning for the chain amid the distractions of bid talk.
Pre-tax losses at Moss Bros widened to £1.6m for the six months to July 26.
Separate sources told Drapers that Jaeger owner Harold Tillman had “oiled the wheels” of the Green and Moss Bros deal, prompting speculation that Green could potentially sell Moss Bros on to Tillman.
Green and Tillman were unavailable for comment.