BC Partners and CVC are among potential suitors for the fast-growing owner of the Littlewoods brand, Sky News learns.
The reclusive twins who own Shop Direct, the retail group behind the Very and Littlewoods brands, are targeting a £3bn-plus price tag for the company as they begin takeover talks with a clutch of buyout firms.
Sky News has learnt that Shop Direct’s management will hold initial meetings in the coming weeks with private equity firms including Advent International, Bain Capital, BC Partners, Cinven, CVC Capital Partners and Permira.
The talks represent the first stage of a tightly managed auction process which could lead to the sale of part or all of Shop Direct, according to insiders.
The Barclay brothers, who also own the Telegraph newspaper titles, are understood to be keen to secure bids which reflect an enterprise value – Shop Direct’s equity and debt – of well over £3bn.
Shop Direct, which is run by chief executive Alex Baldock, has roughly £1bn of debt, meaning its shares would be worth more than £2bn under the Barclays’ plans.
A source close to the retailer insisted that “there will be no value guidance from anyone at any time”, but private equity and banking sources said a £3bn-plus valuation was a fair reflection of the owners’ ambitions.
Shop Direct was one of the big winners in the retail sector during the crucial Christmas trading period, posting a 9% rise in sales during the seven weeks to 23 December.
UBS, the investment bank, is leading the sale process, and is overseeing forthcoming discussions between Shop Direct and at least five private equity firms.
There is no certainty that any of the investment giants lined up to meet Mr Baldock will submit formal offers for the company, and some are understood to harbour concerns about the value of Shop Direct’s large financial services arm, which helps consumers to fund their purchases on credit.
Shop Direct has benefited from growing demand for fast fashion and the explosion in retailing on digital channels.
Nearly two-thirds of its sales are now derived from mobile devices, underlining the departure from Littlewoods’ mail order and high street past.
The Littlewoods catalogue was closed in 2015.
Last year, Shop Direct reported underlying profits of more than £150m, a figure which is expected to show substantial growth again.
A stock market listing of the company is regarded as unlikely.
Shop Direct’s other brands include VeryExclusive, which offers high street premium fashion labels such as Vivienne Westwood, Marc by Marc Jacobs and Reiss.
A Shop Direct spokesman declined to comment, as did the private equity firms.
Written by: Mark Kleinman
Source: News Sky