TPG Exits Department Store Myer in $2 Billion IPO

SYDNEY (Reuters) – Myer, Australia’s largest department store chain, raised A$2.2 billion ($2 billion) in the nation’s biggest IPO in two years, selling shares at the lower end of an indicative range, as institutional investors baulked at the rich valuation.

Myer said in a statement on Thursday its private equity owners TPG Capital and Blum Capital have sold out their entire stake in the IPO at A$4.10 each, confirming an earlier Reuters story based on sources with direct knowledge of the deal.

Myer’s IPO, the biggest Australian offer since the credit crisis hit, is seen as a litmus test for a flurry of other offers which are expected to come to market in the next few months.

Last week, outdoor-gear retailer Kathmandu launched a $349 million IPO while another retailer Ascendia is also planning a float next year. But Myer’s soft pricing would suggest difficult times for the gush of private equity offers.

“We think it’s too expensive,” said Richard Morris, investment manager at Constellation Capital Management, which decided not to buy shares in Myer.

“We’re conscious of the fact that department stores have been losing market share for a number of years…and also the fact that Myer are changing their strategy in terms of the shoppers they target,” he said, pointing to a move downmarket.

The IPO had been marketed in an indicative range of A$3.90-A$4.90 each. The offer price reflects price-to-earnings ratio of 15.1, Myer said in the statement.

Myer was priced cheaper than its main rival, David Jones (DJS.AX), which is trading at 17 times forecast earnings. UK department store Debenhams (DEB.L), also sold by TPG, is trading at 10.2 times forecast earnings while Japan’s Isetan Mitukoshi (3099.T) is trading at 17 times.

Myer will have about 581 million shares on issue, giving it a market value of about A$2.4 billion.

“Given the response from retail and institutional investors, and the preference expressed by investors…the TPG and Blum Capital investment company has decided to sell of its shares to satisfy some of the excess demand at the final price of A$4.10,” the statement added.

Myer, which will trade under the ticker MYR, is set to start trading on Monday.

Macquarie Capital (MQG.AX), Goldman Sachs (GS.N) and Credit Suisse (CSGN.VX) were joint lead managers to the offer.

TPG and Blum bought Myer for A$1.4 billion from Coles Group in 2006, and have spent more than A$370 million in updating logistics operations and renovating stores.

Myer has 65 stores across Australia, nearly double its upmarket rival David Jones’ 36 stores, and claims 3 million shoppers a week through its doors in a country of 21 million. ($1=A$1.11)

By Denny Thomas and Victoria Thieberger
(Additional reporting by Sonali Paul; editing by Mark Bendeich and Valerie Lee)