Bridgepoint's Fat Face scraps listing as IPO market falters

Reuters - UK Focus

(Adds details on company, comments)

By Freya Berry

LONDON, May 22 (Reuters) - British clothing chain Fat Face said on Thursday it had called off a planned110-million-pound ($186 million) London stock market listing, asinvestors become more choosy due to a flood of flotations.

The company, which is owned by European private equity firm Bridgepoint, had aimed to fund its international expansionvia the listing of a 25 percent stake, which would have valued Fat Face at 440 million pounds.

Fat Face cited market conditions for pulling the listing, while analysts suggested Bridgepoint sought too high a price forthe retailer of clothes targeted at an outdoor lifestyle.

"Fat Face came at a full valuation, on the back of a numberof floats that haven't performed great," said John Stevenson,analyst at Peel Hunt. "Valuation is key. At the right price youcan get anything away, and it was the wrong valuation."

Bridgepoint holds around 77 percent of Fat Face. A440-million-pound valuation would have given its stake a valueof around 339 million, less than the 360 million it bought thefirm for in 2007.

Private equity firms generally hold companies for around 4-6years before trying to list or sell them on at a profit.

Fat Face began a recovery four years ago after racking up225 million pounds in pre-tax losses. Bridgepoint brought informer Marks & Spencer (Other OTC: MAKSF - news) director Anthony Thompson asChief Executive to steer the company through the turnaround, andinjected a further 25 million pounds into the business. FormerMarks & Spencer head Stuart Rose joined as chairman in 2013.

Fat Face's core earnings (adjusted EBITDA) rose almost 28percent to 32.1 million pounds in the 35-week period to Feb. 2,2014.

The float would have given the firm a valuation of 13.7times earnings, only a little less than the 14.1 times that itsestablished British peer Next (Dusseldorf: NXG.DU - news) is trading at.

Investors in initial public offerings typically demand adiscount to a firm's peers due to the uncertainty that surroundsa new issuer's subsequent performance.

Thompson said earlier in the month that the proceeds of theIPO would help the company set up a U.S. website and severalstores on the east coast of the United States.

Bridgepoint declined to comment. Fat Face was notimmediately available for comment.

BAD TIMING?

Four companies including UK discount chain B&M unveiledplans for London flotations on Thursday, but after strong demandfor deals earlier this year, the IPO market has grown moreturbulent of late.

UK holidays-to-insurance firm Saga priced atthe bottom of its price range on Thursday despite covering thebooks through both institutions and a retail offering to itsloyal base of 2.1 million customers.

Card Factory received a cool greeting last week,with shares falling almost 10 percent in their first day oftrading.

"What is scary is there has literally been a sea change insentiment over the past couple of weeks. It's been very, veryquick," said a banker who handles equity raising deals. "CardFactory was a bit of a wake-up call."

High-profile consumer floats such as Pets at Home and Just Eat are now trading significantly below theiroffer prices as investors grow more choosy.

"We are just looking at each individual company on itsmerits," said Andrew Lynch, Fund Manager at Schroders (LSE: SDR.L - news) . "Thereare so many of them now that you can absolutely afford to bevery selective."

London has been a hotspot for listings this year, with 30companies raising $7.4 billion so far in 2014, up 163 percent onthe same period last year, according to Thomson Reuters (Frankfurt: TOC.F - news) datalast week.

"There have been a lot of retail IPOs and they're gettingmore difficult to do," an analyst said, saying companies neededto stand out from the crowd or have potential to take businessaway from established competitors.

"Unless the business has a unique selling point or adisruptive business model it's tricky to get away. We contrastthat with B&M today - there's still demand for a business likethat," said the analyst.

Fat Face's flotation was due to be led by Citigroup (TLO: CIT-U.TI - news)and Jefferies, with Canaccord Genuity (Other OTC: CCORF - news) as lead manager and Lazard as financial adviser.

($1 = 0.5925 British Pounds) (Reporting by Freya Berry; Editing by John Stonestreet andDavid Stamp)

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