(Adds details on company, comments)
By Freya Berry
LONDON May 22 British clothing chain Fat Face
said on Thursday it had called off a planned
110-million-pound ($186 million) London stock market listing, as
investors become more choosy due to a flood of flotations.
The company, which is owned by European private equity
firm Bridgepoint, had aimed to fund its international expansion
via the listing of a 25 percent stake, which would have valued
Fat Face at 440 million pounds.
Fat Face cited market conditions for pulling the listing,
while analysts suggested Bridgepoint sought too high a price for
the retailer of clothes targeted at an outdoor lifestyle.
"Fat Face came at a full valuation, on the back of a number
of floats that haven't performed great," said John Stevenson,
analyst at Peel Hunt. "Valuation is key. At the right price you
can get anything away, and it was the wrong valuation."
Bridgepoint holds around 77 percent of Fat Face. A
440-million-pound valuation would have given its stake a value
of around 339 million, less than the 360 million it bought the
firm for in 2007.
Private equity firms generally hold companies for around 4-6
years before trying to list or sell them on at a profit.
Fat Face began a recovery four years ago after racking up
225 million pounds in pre-tax losses. Bridgepoint brought in
former Marks & Spencer director Anthony Thompson as
Chief Executive to steer the company through the turnaround, and
injected a further 25 million pounds into the business. Former
Marks & Spencer head Stuart Rose joined as chairman in 2013.
Fat Face's core earnings (adjusted EBITDA) rose almost 28
percent to 32.1 million pounds in the 35-week period to Feb. 2,
The float would have given the firm a valuation of 13.7
times earnings, only a little less than the 14.1 times that its
established British peer Next is trading at.
Investors in initial public offerings typically demand a
discount to a firm's peers due to the uncertainty that surrounds
a new issuer's subsequent performance.
Thompson said earlier in the month that the proceeds of the
IPO would help the company set up a U.S. website and several
stores on the east coast of the United States.
Bridgepoint declined to comment. Fat Face was not
immediately available for comment.
Four companies including UK discount chain B&M unveiled
plans for London flotations on Thursday, but after strong demand
for deals earlier this year, the IPO market has grown more
turbulent of late.
UK holidays-to-insurance firm Saga priced at
the bottom of its price range on Thursday despite covering the
books through both institutions and a retail offering to its
loyal base of 2.1 million customers.
Card Factory received a cool greeting last week,
with shares falling almost 10 percent in their first day of
"What is scary is there has literally been a sea change in
sentiment over the past couple of weeks. It's been very, very
quick," said a banker who handles equity raising deals. "Card
Factory was a bit of a wake-up call."
High-profile consumer floats such as Pets at Home
and Just Eat are now trading significantly below their
offer prices as investors grow more choosy.
"We are just looking at each individual company on its
merits," said Andrew Lynch, Fund Manager at Schroders. "There
are so many of them now that you can absolutely afford to be
London has been a hotspot for listings this year, with 30
companies raising $7.4 billion so far in 2014, up 163 percent on
the same period last year, according to Thomson Reuters data
"There have been a lot of retail IPOs and they're getting
more difficult to do," an analyst said, saying companies needed
to stand out from the crowd or have potential to take business
away from established competitors.
"Unless the business has a unique selling point or a
disruptive business model it's tricky to get away. We contrast
that with B&M today - there's still demand for a business like
that," said the analyst.
Fat Face's flotation was due to be led by Citigroup
and Jefferies, with Canaccord Genuity as lead manager and Lazard
as financial adviser.
($1 = 0.5925 British Pounds)
(Reporting by Freya Berry; Editing by John Stonestreet and