LONDON (Reuters) – Private equity firm Kohlberg Kravis Roberts is buying British retailer Pets at Home in a deal one person familiar with the matter said was worth about 955 million pounds ($1.5 billion) including debt.
The higher-than-expected price could fuel speculation that other companies considering sales, like fashion retailers New Look and SuperGroup and online grocer Ocado, might also opt for a private equity deal rather than an initial public offering, analysts said.
KKR, whose retail investments include health and beauty group Alliance Boots and toys chain Toys’R’Us, saw off rival bids from Apax, Bain and TPG, sources close to the matter said.
KKR did not give a value for the deal a person familiar with the process said it was 955 million pounds, including around 230 million in debt. That would mean a handsome return for private equity group Bridgepoint [BRDG.UL], which bought Pets at Home for about 230 million pounds in 2004.
Pets at Home had earnings before interest, tax, depreciation and amortisation (EBITDA) of 70 million pounds in the year ended March 2009, on sales of 404 million.
Earlier this month, it posted a 6.7 percent rise in like-for-like sales for the 6 weeks to Jan. 7.
KKR said it would continue Pets at Home’s rapid growth of recent years, which has seen it expand into grooming and veterinary services as well as opening more stores.
KBC Peel Hunt analyst John Stevenson thought New Look, which newspapers have said was looking for a valuation of 1.7-1.8 billion pounds, might be too big to be snapped up by private equity firms as debt-financing is still hard to come by.
He said the fast-growing chain would probably have to accept a more modest valuation because investors were wary about the outlook for consumer spending.
Stevenson said New Look’s private equity owners, Apax and Permira [PERM.UL] might be able to reach a compromise with investors, as they were expected to retain a stake in the business they might be able to sell at a better price over time.
“It’s an attractive business, with a clear growth profile in the UK and internationally,” he said.
Nomura is acting as financial advisor to KKR on the Pets at Home deal, while Nomura, Calyon and KKR Capital Markets are arranging debt financing, with the help of Commerzbank.
Bridgepoint is being advised by Rothschild.
By Tom Potter
(Editing by James Davey, Dan Lalor and Karen Foster) ($1 = 0.6195 pound)