LONDON — British tycoon Philip Green is set to become the U.K.’s largest clothing retailer.
Green, who already owns the department store chain British Home Stores Ltd. and the Mark One discount clothing shops, has made a proposed $1.2 billion bid for the shares of Arcadia Group PLC he does not already own. Arcadia is the U.K.’s second-biggest clothing retailer after Marks & Spencer PLC. Green’s bid has been approved by Arcadia’s board.
Arcadia owns London’s youth fashion meccas Top Shop and Miss Selfridge, in addition to the Dorothy Perkins and Evans clothing chains. Arcadia has been undergoing a turnaround over the last three years under its chief executive Stuart Rose, who replaced the American John Hoerner after the retailer plunged into the red.
Rose stands to make more than $35 million from the proposed sale of Arcadia, although Green has secured his services at the group at least through the Christmas sales period.
Green, who already owns 20 percent of Arcadia, plans to bid $6.12 per share in cash for the remaining 80 percent. A formal offer is expected to come early next week, an Arcadia spokeswoman said. The bid still must be approved by Arcadia’s shareholders.
(Dollar figures are converted from the pound at current exchange rates.)
Green will spend a total of $1.2 billion for the outstanding shares, or 12 percent more per share than his original offer a few weeks ago. He has also agreed to pay shareholders a second-interim dividend of 6 cents per share for the year ended Aug, 31. That payment will be due next year.
If the deal goes through, Green’s share of the U.K. women’s clothing market will rise to 12.6 percent from 2.6 percent. He would control the largest chunk of the market, followed by Marks & Spencer, which has an 11.1 percent share, and Next with a 4.5 percent share. However, Marks & Spencer’s apparel sales of about $5.5 billion a year would still be larger than Green’s combined sales of about $4 billion.
Arcadia has about 1,200 outlets around the country.
Shares in Arcadia were trading at $4.50 before Green made his intentions known about six weeks ago. On Friday, they closed at $6.06.
Green is famous in the U.K. for his flamboyant lifestyle — he spent $7.5 million on his 50th birthday party in Cyprus —and his flair for transforming companies from rags to riches. He purchased British Home Stores in 2000 for $300 million and transformed it into a $1.5 billion company by cutting costs and tightening operations. BHS sells clothing and homewares. Ironically, his turnaround of BHS was assisted by Terry Green (no relation to Philip Green), a former colleague of Rose’s at Arcadia when it still owned both its specialty stores and the Debenhams department store chain. Rose left the group after Debenhams was spun off from Arcadia into a separately listed company, which Terry Green then headed. Green left Debenhams to assist Philip Green at BHS (although he’s since left that retailer as well). Hoerner took control of the Arcadia specialty stores, only to be pushed aside when their performance lagged and the board lured Rose back.
Merrill Lynch advised Philip Green while Schroder Salomon Smith Barney advised Arcadia.