December 6, 2012 10:20 am

Green sells 25% Topshop stake

Sir Philip Green has agreed the sale of a minority stake in Topshop and Topman to a US private equity firm, in a deal that values the British fashion chain at £2bn.

The billionaire British entrepreneur on Thursday confirmed the all-cash sale of a 25 per cent stake in Topshop and Topman for £350m to Leonard Green & Partners, a US private equity group with broad retail interests.

The partnership will enable the fashion chain to further its expansion into the lucrative US market, following a recent deal with department store chain Nordstrom to market Topshop and Topman clothing.

Topshop and Topman are widely considered the two jewels in the crown of Sir Philip’s Arcadia retail empire, whose other brands include department store BHS and high street names such as Evans, Dorothy Perkins and Miss Selfridge.

Under the terms of the deal, Topshop and Topman are given an enterprise value of £2bn. The two chains are being put into a new limited company within Arcadia, which is also providing £600m of debt instead of bank borrowing.

Leonard Green is paying Arcadia £350m, equivalent to 25 per cent of Topshop and Topman’s equity value. Arcadia has used the funds to pay off its £300m of bank borrowings.

Sir Philip insisted Arcadia could have easily refinanced the five-year facility, which expired at the end of this year, but he had instead chosen to clear the debt 26 days before it was due. Arcadia has also retained the Topshop and Topman’s Oxford Street store, which is estimated to be worth about £400m-£500m.

“We have lots of firepower,” he said, which he could use to further expand Topshop and Topman in the US and take the chains into Asia.

Shares in Marks and Spencer also rose 1.45 per cent to 397p, on speculation that Sir Philip could make another approach.

“Under my family’s ownership we have continued to invest in and grow the Topshop and Topman brands. Having had extensive dialogue over several months, the board felt that Leonard Green & Partners becoming our partner would be extremely beneficial,” said Monaco-based Sir Philip.

“Their experienced management teams and knowledge of retail in the US will greatly assist Topshop and Topman with their global expansion,” he said, identifying China and other parts of Asia as other potential targets for growth.

The sale marks the first occasion that Sir Philip has agreed to outside investment in his family-controlled group since he acquired Arcadia for £840m a decade ago.

Leonard Green has a record of investing in US retail companies and has held stakes in Whole Foods Market, J Crew, Neiman Marcus, Petco and The Container Store.

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