TOM SINGH, the founder of New Look, is considering plans to take the fashion chain private. Advisers to Mr Singh, whose family owns 28 per cent of New Look, admitted yesterday that he was in discussions with banks and private equity houses about funding a takeover bid.
Analysts predict he would have to pay up to 350p a share, or a 13 per cent premium to yesterday’s closing price, valuing the group at £700 million. The shares fell 4¼p to 310½p.
Last month Mr Singh disclosed that he was “reviewing the options” for his family’s stake in New Look, leading to speculation that Stephen Sunnucks, the chief executive, would attempt a management buyout. On Friday the shares rose sharply as bid speculation intensified.
Bankers argued yesterday that Mr Sunnucks had little appetite for launching a buyout, pointing out that he and his finance director were away on holiday this week and not in discussions with potential financial backers.
In contrast Deutsche Bank, which is advising Mr Singh, said he was in “preliminary discussions with potential providers of finance which may or may not lead to an approach being made to New Look”.
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Banking sources said that any potential bid was unlikely to be launched for several months and that Mr Singh was still considering other options for his investments, including selling part of his stake, or maintaining the status quo. It is thought unlikely that Mr Singh would want to sell his entire stake, but he is understood to be keen to work with the present management, which is widely respected.
Analysts said that Mr Singh had originally intended to sell his stake, but had been forced into considering a buyout because of a lack of interest from trade or private buyers.
One analyst commented that he would be surprised if Mr Singh, who is now a non-executive director of New Look, decided to buy all of the business. He added: “Tom is now quite disconnected from the group. He spent a long time trying to bring the company to flotation. Why would he want to buy it back?” Private equity firms say that New Look is not particularly attractive as an investment because it has a relatively low level of freehold properties against which to raise finance, and is a mature business.
However, industry experts suggested Mr Singh would be able to develop New Look’s fledgeling menswear clothing ranges and re-work the smaller stores more easily out of the glare of the stock market.
Mr Singh, 53, opened the first New Look store in Taunton 34 years ago with the aid of a £5,000 loan from his parents. He is Britain’s 133rd richest man, according to The Sunday Times Rich List, with an estimated family fortune of £250 million. The family is thought to have made £170 million from the sale of a large stake in New Look to venture capitalists in 1996. The chain was floated two years later.