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BRAIT SE - Braits acquisition of a c.90% interest in New Look

Release Date: 15/05/2015 07:05
Code(s): BATP BAT     PDF:  
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Brait’s acquisition of a c.90% interest in New Look

Brait SE
(Registered in Malta as a European company)
(Registration No.SE1)
Share code: BAT ISIN: LU0011857645
Share Code: BATP ISIN: MT0000680208
(“Brait”)

BRAIT’S ACQUISITION OF A c.90% INTEREST IN NEW LOOK
 
    1. Introduction
          
       Shareholders in Brait (“Shareholders”) are advised that Brait’s
       wholly owned subsidiary, Brait Mauritius Limited, has entered
       into an agreement to acquire a c.90% interest in New Look Retail
       Group Limited (“New Look” or “the Company”) for c.GBP780 million,
       primarily from funds advised by Permira and Apax (“the
       Acquisition”).
       
    2. Overview of New Look
          
       Founded in 1969, New Look is a leading fast fashion multichannel
       retailer operating in the value segment of the UK clothing and
       footwear market with a growing international presence. New Look
       aims to offer an exciting shopping experience and the latest
       trends in fashion, catering for a broad spectrum of ages from
       early teens to over 45’s. New Look’s core target audience is
       fashion-conscious 16 to 35 year old women. According to Kantar
       Worldpanel for the 24 weeks ending March 2015 the Company is the
       leading retailer by value in the under 25’s womenswear and teens
       (age 9 – 15) market in the UK. In the 52 weeks ending December 21
       2014, approximately 14.1 million people in the UK made a purchase
       from New Look, with approximately 43% of female adults and
       teenagers in the UK shopping at New Look at least once in 2014.

       In addition, New Look is expanding its menswear offering, with
       the aim of growing menswear sales and market share.

       New Look’s average time from product design to store delivery is
       approximately 13 weeks, with some key high fashion items
       delivered in less than 2 weeks.

New Look operates a multichannel model which, as at 28 March 2015,
comprised:

      - 809 New Look stores, including 569 directly operated stores in
        the UK, with a broad geographical coverage;
      - 135 directly operated stores principally in China, France,
        Poland, Ireland and Belgium and concession stores in Germany
        and the Netherlands and 105 franchise stores in the Middle
        East, North Africa, Europe and Asia;
      - an own e-commerce platform serving customers in over 100
        countries across the globe; and
      - a third-party e-commerce platform through which it sells
        products on websites of 11 third-party e-commerce retailers,
        including ASOS and Zalando, which currently serve in the
        aggregate approximately 200 countries.

      Revenue and EBITDA for the 12 months to December 2014 are
      GBP1.399 billion and GBP211 million, respectively. New Look
      reported revenue of GBP1.392 billion and EBITDA of GBP204 million
      for the financial year ended March 2014. This compares to revenue
      of GBP1.355 billion and EBITDA of GBP184 million for the
      financial year ended March 2013. Numbers for the financial year
      to March 2015 are expected to be released to New Look’s
      bondholders on 2 June 2015.

3. Rationale for the Acquisition

New Look is positioned in the fast fashion value segment of the
apparel market which is driven by a number of factors including:

      - Increasing consumer demand for more affordable fashionable
        clothing and consequent popularity of value retailers;
      - Improvements in the supply chain, making fashionable clothing
        more available; and
      - Growth in demand and supply associated with increasing
        popularity of e-commerce, providing a wider selection of
        products as compared to stores and making shopping easier for
        consumers.

New Look is attractive to Brait for the following reasons:

- Demonstrated double digit EBITDA growth in recent years;
- Solid cash flow generation;
- Established UK footprint exposed to the higher growth value
  segment of the apparel and accessories market;
- Leading UK market value share: No. 2 overall womenswear and No. 1
  among under-25 womenswear;
- Strong growth prospects in France, Germany, Poland and especially
  China which is a priority market;
- Strong brand awareness in particular amongst women in the UK;
- Well-developed multi-channel offering via traditional stores and
  a fast growing e-commerce platform incorporating ‘click and
  collect’;
- The scale and efficiency of New Look’s fast fashion operating
  model from source to customer (via shop-floor or e-commerce) is
  difficult to replicate;
- Well-invested infrastructure and systems including a state-of-
  the-art distribution centre; and
- Partnering with an experienced, aligned and proven management
  team, and with the founder of the business.

4. Summary of the key terms of the Acquisition

   Brait will acquire a c.90% interest in New Look, primarily from
   funds advised by Permira and Apax. The founder’s family interests
   and the existing management team will be reinvesting alongside
   Brait for c.10% shareholding.
        
   The Acquisition values New Look at an enterprise value of
   c.GBP1.9 billion. The estimated consideration payable by Brait of
   c.GBP780 million for a c.90% interest takes into account
   estimated transaction costs, but may be adjusted up or down
   depending on actual transaction costs (“Purchase Consideration”).
   Brait will fund the Purchase Consideration using facilities and
   cash on hand.

   New Look has net financial debt of c.GBP1 billion. Brait and
   management are comfortable with the Company’s current leverage
   ratio given its strong cash flow generation. Subject to market
   conditions, the Company will review financing alternatives in
   order to optimise the capital structure within a similar leverage
   range.


5. Conditions precedent

   The Acquisition is not subject to any regulatory approvals. The
   completion date for the Acquisition is 25 June 2015.
     
     
 
Malta
15 May 2015

Brait’s primary listing is on the Euro MTF market of the Luxembourg
Stock Exchange and secondary listing on the Johannesburg Stock
Exchange.


Joint Investment Banks to Brait
Rand Merchant Bank, (A division of FirstRand Bank Limited)
Nomura International plc


United Kingdom attorneys
Linklaters


South African attorneys
DLA Cliffe Dekker Hofmeyr


European legal advisor
M Partners S.à r.l. (A member of Maitland Legal)


Sponsor to Brait
Rand Merchant Bank (A division of FirstRand Bank Limited) 

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