FT article11 Dec 2011 19:11
Several private equity groups including Cinven are circling Mothercare as they weigh a takeover approach for the lossmaking UK baby goods retailer.
Cinven is among a handful of buy-out groups that are believed to be in the early stages of looking at a possible more than £150m bid for the listed retail group.
The move underlines how private equity is scratching around for potential takeover targets amid a lack of deal flow since the financing markets dried up this summer.
Buy-out firms have steered away from the UK’s troubled retail sector in the past two years but the sharp share price falls and the vast restructuring potential have tempted them to take a fresh look.
However, any bid would be dependent on the ability to obtain financing in debt markets and amid what is perceived by banks as a high-risk sector.
Cinven’s deal team is currently assessing publicly available information about Mothercare, but it has not mandated any bank, nor has it spoken to lenders or approached the company. Cinven declined to comment.
The UK buy-out group, run by Hugh Langmuir after a management shake-up two years ago, will soon have a huge war chest to invest as it is approaching the first close on its next €5bn fund.
The group has owned a string of retail companies in the past decades, including Allied Carpets, Hamleys and Peacocks in the UK.
A combination of subdued consumer spending and rising costs has prompted a slew of profit warnings in the retail sector this year, causing share prices to plunge, and pushing many high street chains closer to collapse.
Mothercare’s share price plunged 42 per cent in a single day in October after the retailer warned on profits, increased competition from supermarkets and online retailers selling toys, children’s clothing and buggies. Ben Gordon, the longstanding chief executive, resigned a week later, and the search continues for his replacement.
Alan Parker, Mothercare’s chairman, is grappling with how to stem the chain’s losses in the UK, which are eroding its profitable international franchise business. However, he has previously insisted that the UK would “always b
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