Depressed company valuations can lead to a buyers' market and the retail sector is starting to see the vultures swoop in.
“Valuations across consumer-related sectors are pretty depressed, given the factoring in of a recessionary environment,” said John Stevenson, a retail analyst at Peel Hunt
“If you look across the sector, valuations are fundamentally attractive if you’re looking at it from a three to five-year view,” he added.
That would tell us why there has been a flurry of takeovers and minor stake acquisitions in the retail sector, but who is doing the buying?
Frasers acquires stake in N Brown
Mike Ashley’s Frasers Group continued its stake-building spree, snapping up 4.54% in N Bown.
Behind brands like Simply Be and Jacamo, the Manchester-based N Brown reported a fall in revenues and profits just last week due to weaker consumer confidence.
It is the latest move in a prolonged buying streak, which includes I Saw It First, an investment in Hugo Boss and a £20mln acquisition of Missguided’s assets, as it looks to open additional channels of revenue..
Aside from that, it continues to pursue a deal for Australian fashion marketplace MySale, although attempts thus far have proven unsuccessful.
According to a report in Sky News, Frasers is also rumoured to be mulling a deal for failing Matalan, although it is seemingly well behind in that race.
Matalan takeover
Elliot Advisors, the prominent activist investor with stakes in GSK and Avant Homes to name a few, is believed to be working with Matalan founder John Hargreaves to fund an offer to buy the business.
Hargreaves founded the Liverpool-based business in 1985 and is working to push through a deal for the fashion and homeware retailer, which is weighed down by £350mln worth of debt that it needs to refinance by January if it is to stay afloat.
US-based investment firm Elliot, founded by Wall Street mogul Paul Singer, is known for aggressively pushing for strategic and management changes.
Most recently, it attempted, unsuccessfully, to push through changes at GSK, Taylor Wimpey and SSE.
Doncaster car dealer builds stake in Joules
Perhaps one of the more surprising deals is Doncaster-based Richard Teatum, who owns Stoneacre Motor Group, building an 8.9% stake in Joules worth nearly £1mln
Next recently pulled out of a £15mln deal to purchase the clothing company, opening the door for any potential would-be stake builders to enter.
Joules and its 130 stores nationwide announced this week it was considering a restructuring of its creditors due to financial difficulties that have blighted the business.
Millionaire Teatum, who owns about 100 dealerships employing roughly 3,000 across the country told the Retail Gazette that he “might buy some more shares, I might sell some more.”
“I think the shares are very good value, otherwise I wouldn’t have bought them.”
“I think the company can be turned around, not easily, but it can be.”
Teatum added he “dips” into the stock market, although this is his first investment in a clothing retailer.
A fashion retailer on a buying spree, an investment firm, and a car dealership owner all dipping their toe into retail tells you everything you need to know about who is doing the buying.
Anyone and everyone who thinks there is value under current market conditions.