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Posts Tagged ‘Seymour Pierce’

Channel 4 Chief Inches Closer to Borders UK Deal

As per Publishing News (and reported earlier this week) the entrepreneur Luke Johnson and his private equity firm Risk Capital Partners was widely expected to take control of Borders, keeping the current CEO David Roche at the helm, closing fewer than 10 stores and retaining the Borders name. Johnson is understood to have taken soundings on Roche from industry insiders this week – the sort of move that is only made when all the deal requirements are in place. One observer told PN: “Although he’s obviously acting out of self-interest and wants to make money, he’s clearly interested in bookselling as a sector. He’s imaginative and feisty, well-regarded when it comes to relatively small scale private equity investments.”

Analyst Richard Ratner at Seymour Pierce described Johnson as “a good egg. He’s got a good reputation and he’s got good people with him. He’ll buy something if it’s got potential.” Insiders say that as Chair of Channel 4, Johnson has seen the potential to boost book sales through Richard & Judy. Those who know him say that he cares about books and their cultural importance, and that he sees Borders “as a business that matters.” One added: “He sees Borders as a strong intrinsic business, one that doesn’t need to be broken up. And because he cares about it, he’ll be willing to accept slightly lower financial returns than in some of his other ventures.”

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Borders Wants UK Deal By Autumn

Borders is believed to be keen to clarify the future of its UK and Ireland business before the main autumn selling season begins, according to the Bookseller’s Graeme Neill. The summer lull has seen suitors scrutinise the finances of the company, with W H Smith gaining increasing currency as a potential buyer if the price drops below 25m pounds. “I can’t see it operating as a standalone business,” said influential City analyst Richard Ratner from Seymour Pierce. “WH Smith will only take them over for a decent price—and they will strip out the underperforming stores to cut costs.”

Fopp Report: Individual Stores May Be Rescued, But Not Whole Chain

Publishing News has its report on the bankruptcy of music chain Fopp, starting out with the news that suppliers are claiming ‘retention of title’ on the stock, in an attempt to recover debts, after the chain fell into receivership last week. A spokesperson for Ernst & Young, which is handling the music chain’s receivership, said: “There have been enquiries from interested parties but interest in the business as a going concern is poor so far. Any parties who are interested in the business need to contact us as early as possible as our timeframe is in terms of days rather than weeks.”

Publishers spoken to have expressed regret at the chain’s closure and concern about the money owed, while emphasizing that the sums involved are relatively small compared to what’s owed to DVD and music companies – somewhere on the order of 10 to 20 million pounds. Complicating matters, the decision of suppliers to claim ‘retention of title’ on much of Fopp’s stock – where the supplier claims ownership on goods until they have been paid for – could further dampen any enthusiasm to buy the business as a whole. David Stoddart at Teather & Greenwood saw some hope for individual stores being bought, although was less optimistic about the chain as whole, while Richard Ratner at Seymour Pierce echoed this and added: “It’s a very difficult business and you do need economies of scale. Fopp’s turnover together with its large number of stores didn’t provide that. It is still possible that someone might want to take the whole lot, if unlikely given the current climate. One or two sites could interest HMV, although they may want to downsize at the moment. It’s a bleak picture.”

Possibilities for Borders UK Buyout

Sir Richard Branson is considering a 50m pound bid for the Borders books chain in the UK, in what would be a major expansion of his retail operations. According to a report in trade magazine Retail Week, the billionaire tycoon has requested detailed information on the 70-shop chain from Merrill Lynch, the investment bank which is handling the sale.

But Branson faces quite a lot of competition, according to Publishing News. Industry observers believe that David Roche, Border’s CEO on the UK side, will try and mount an MBO for the company following last week’s shock announcement from its parent company that it intended to sell its UK, Australia and New Zealand operations to concentrate on the domestic US market. Speculation increased this week that a breakup of the company is likely too and that former Ottakar’s boss James Heneage may find himself involved, too. One observer said: “David would love to take the company – he’s ambitious and well-regarded, and is probably one of the more capable people to be able to front an MBO. Borders US has to sell it within a time window in order to save face, because they’ve gone so public on it and in order to keep the UK team engaged. If David can get the backing, he might get it at a good price.” Roche himself simply said: “All options are open.”

Observers point out that an MBO will, obviously, require backing. Analyst David Stoddart at Teather & Greenwood said: “I can’t believe that the private equity fraternity hasn’t had a good look at HMV and drawn their own conclusions. They’ll have to make an assessment of the exit price they’re likely to get after three to five years.” Figures of between �50m and �70m are being suggested for the group, with Richard Ratner at Seymour Pierce saying: “I don’t think it will go for very high money and it could be broken up. An MBO is possible. Apart from WHSmith cherry picking, you’ve got to rule Smiths out. Waterstone’s might be interested in the odd store I suppose.”

Analysts Optimistic about WHSmith fortunes

The book retailer’s sales may have tumbled sharply at the end of 2006, but as the Independent reports, the City was unperturbed because of a sharp improvement in profit margins. Seymour Pierce analyst Richard Ratner said the trading statement was “overall much as expected”. He added: “Kate Swann [WHSmith CEO] has done a great job but at some stage she has to get top line moving. Equally, the current performance is a massive indictment on the mismanagement of WH Smith’s retail arm for the last decade or longer.”

Swann said: “In a competitive period on the high street, we continued to deliver our strategy to improve profitability. We increased the pace at which we are rebalancing the mix of our business towards our core categories.” Still, Swann added that the company remained cautious about the outlook for consumer spending. And then there’s the other news that the Telegraph reported, which is that the company is facing attack for its pension plan changes. Some 1,800 staff at the retailer are to lose their generous final salary pension benefits under a proposal made earlier this month, and unions have accused the company of using changes to its pension scheme as a cynical means of cutting costs.