Phase Eight is to be sold to Cape Town-based retailer The Foschini Group in a deal that could see the British womenswear retailer rolled out across South Africa.
The Foschini Group has agreed to acquire 85% of Poppy Holdco Limited, which trades as Phase Eight, at an enterprise value of £238m – with an equity value of £159.2m after taking into account net debt and related adjustments.
Private equity group TowerBrook bought a 60% stake in Phase Eight for £80m in 2011 (with the remainder understood to be held by management) and appointed Rothschild last year to advise on a possible sale of the business. A deal had not been expected until later in the year.
TowerBrook will now exit the business completely and Phase Eight’s management will become 15% shareholders alongside The Foschini Group in a new holding company.
Phase Eight has a portfolio of more than 400 stores, including 98 outside of the UK in countries including Switzerland and Germany, in addition to being sold in department stores such as John Lewis.
The retailer reported a 15% sales increase to £141m in the full year to February 1, 2014, while earnings before interest, taxes, depreciation and administration increased 16% to £24m.
In a statement, The Foschini Group (TFG) said: “Phase Eight has achieved consistent growth in sales and profitability through continuous incremental evolution of the brand’s operating model, product breadth and routes to market.
“Phase Eight satisfies four specific criteria in TFG’s expansion strategy: a good track record - being highly profitable and cash generative; multichannel business - with an established ecommerce platform (currently 17% of revenue); an experienced and self-sufficient management team; and strong growth prospects - arising from its established position in the UK and opportunities to further expand in international developed and emerging markets.”
It continued: “TFG believes that the product and value offering of Phase Eight will combine exceptionally well with TFG’s current brands, with the store and concession portfolio creating a potential platform for the expansion of TFG brands internationally.
“Consideration will be given to introducing Phase Eight into South Africa on a basis that complements TFG’s existing operations.”