Retail: Contrasting fortunes as Poundland and Pets at Home join London stock market
09:25 12 March 2014
Retail chains Pets at Home and Poundland joined the London stock market today in flotations valuing the pair at a combined £2billion.
The start of conditional dealings saw contrasting fortunes for the pair, with Pets at Home slipping back from its opening price of 245p but Poundland surging by 18% to increase it market value to nearly £900million at one stage.
A bout of flotation fever on financial markets has also seen convenience store McColl’s and domestic appliances group AO join the market in recent days.
Pets at Home, which was valued at £1.2bn in the initial public offering, is raising £280m towards paying down debt. Majority owner KKR and other shareholders, including about 500 members of staff who owned 10% of the business, will receive £210 million by reducing their stakes.
Ordinary investors who applied for the minimum of £1,000 of shares will get the full amount but those wanting more than £1,000 have been limited to 420 each, worth £1,029. Staff will also receive shares worth a total of £1.7m.
Poundland’s flotation reduces the stake of private equity firm Warburg Pincus, which bought the group for £200m in 2010 and will pocket most of today’s proceeds of £375m. The retail chain will not realise any new funds.
Warburg Pincus is expected to retain a stake of more than 30%, while directors and senior staff will have 10.2% of the company.
Since opening its first store in Burton-on-Trent in 1990, Poundland has grown to nearly 500 outlets in the UK and plans to double that number. It also operates more than 30 stores under the Dealz brand in Ireland.
Founder Steve Smith netted £50m from selling his stake in the business more than a decade ago.
Chief executive Jim McCarthy said: “We look forward to continuing to deliver, as a listed company, Poundland’s mission to provide our customers with amazing value every day.”
Pets at Home claims to have a 12% share of the market and more stores than its five biggest rivals combined. But it is keen to expand further, boosting its number of stores from 369 to more than 500, while it wants to almost treble the small animal veterinary surgeries it operates to over 700.
The retailer’s listing comes 23 years after founder Anthony Preston opened the first Pets at Home store in Chester. Mr Preston retains a small stake in the group.
The business was then developed by private equity firms after its acquisition by Bridgepoint for £230 million in 2004 and then KKR, which acquired Pets at Home in a £955m deal in 2010.
Chief executive Nick Wood said: “Pets at Home has enjoyed strong growth for over a decade and we are now ready to move on to the next stage of our development as a listed business.”
Unconditional share dealings in the two companies will commence on Monday.