BC Partners is considering plans to float Phones4U this year on the London Stock Exchange, where it would join a parade of companies that are seeking to take advantage of buoyant equity markets
The move could value the UK phone and electrical goods retailer at up to £1bn and give the private equity group an opportunity to exit the retailer earlier than expected, having bought the business just three years ago for about £700m.
The company would join its listed rival Carphone Warehouse, which has performed well for investors over the past few years on the back of demand for smartphones and fast mobile broadband services. Shares in Carphone Warehouse have risen by almost a third in the past year.
BC Partners has already recouped the cash used in the buyout of Phones4U after paying itself a one-off dividend raised from the issue of £200m of privately placed bonds last year. Phones4U’s net debt increased to about four times earnings before interest, taxes, depreciation and amortisation following the debt issue.
Phones4U was founded by entrepreneur John Caudwell, who sold the group to Providence and Doughty Hanson for £1.5bn in 2006 in a deal now seen as typical of the debt-backed deals being struck before the credit crunch in the financial downturn.
An IPO could take place as early as the autumn, according to people familiar with the situation. The plans are at an early stage and no decision has been taken, however, according to informed people. Phones4U has not appointed banks to advise on the flotation.
Phones4U would join a long list of potential flotations already in the pipeline ranging from near-term equity offerings of Poundland and Pets at Home and others scheduled for later in the year such as Game, Fat Face and House of Fraser.
Private equity groups are accelerating their plans to list their portfolio companies as they seek to return cash to their investors after years of slower distributions in the aftermath of the financial crisis.
Phones4U, which has more than 500 stores across the UK, has benefited from the boom of smartphones and tablets. Like Carphone Warehouse, its revenues have been boosted by the shift to superfast 4G mobile services by many customers, who generally take more lucrative and longer-term contracts in the process. However, the market could change again in the longer term given suggestions that the main mobile operators are less happy to rely on third-party phone retailers to gain customers.
Three, the Hutchison Whampoa-owned British group, pulled out of third party stores before Christmas to focus on its own retail efforts, while Vodafone’s chief executive Vittorio Colao has previously questioned the logic of paying another company to sell its phones.
On Tuesday Carphone Warehouse delivered its sixth consecutive quarter of revenue growth, saying the popularity of 4G mobile services helped offset a sharp fall in non-contract phone sales.
The UK’s largest mobile phone retailer said it would continue to focus on increasing its 4G business as it reported third-quarter revenue growth slightly ahead of analysts’ consensus forecasts.
The group reiterated its intention to expand in Europe through its “Connected World” partnerships, with deals planned to add to already announced joint ventures to work with Metro Group in the Netherlands and Germany.
The retailer said revenues increased by more than 3 per cent in the third quarter, although connections fell 12.7 per cent because of the decline in so-called “pre-pay sales” where customers pay by the minute rather than through a contract. It reiterated its full-year guidance for earnings per share of 17-20p, up from 12.3p in the 2012-13 year.