Shandong Ruyi looks over books of retail group, thought likely to fetch half its £1bn valuation
Sir Philip Green is thought to be considering the sale of his Topshop-to-Burton empire Arcadia as a Chinese textiles giant reportedly looks over its books.
Green is thought to be seeking an exit from the group as his ageing, poor-performing brands including Dorothy Perkins, Wallis and Evans come under attack from fast-expanding online players such as Boohoo and Missguided.
Negotiating an elegant departure will not be easy for Green, who will be 66 next month, particularly as his every move is under scrutiny following the collapse of BHS in 2016, a year after he sold the department store for £1 to the former bankrupt Dominic Chappell.
According to the Sunday Times, Jining-based Shandong Ruyi has held discussions and looked over the books of Arcadia, which recently installed The Apprentice regular Karren Brady as chair.
Shandong Ruyi has been on a buying spree in Europe. It acquired a controlling stake in the Swiss luxury leather goods company Bally last month and negotiated a 54% stake in the London-listed fashion manufacturer Bagir. It bought the troubled British heritage brand Acquascutum for £95m last year, after taking a majority stake in the French fashion house SMCP, the owner of Sandro and Maje, for €1.3bn (£1.15bn) in 2016.
Arcadia, which directly employs nearly 26,000 people worldwide and has about 2,800 stores, could be valued at more than £1bn, but industry watchers said a buyer is likely to pay less than £500m because the group will potentially require heavy restructuring work to deal with a large portfolio of unwanted stores.
All of the Arcadia brands, including its flagship Topshop, are understood to be suffering sales declines as the retail fashion industry struggles with the rise of online competitors and young women switch to spending on beauty, telecommunications, dining out and takeaways.
Arcadia’s pension funds have a combined deficit of about £1bn on a buyout basis. That valuation is based on the likely cost of winding up the scheme and securing benefits with an insurer.
On a going concern basis, based on maintaining the scheme alongside the retail business, the deficit was still nearly £565m at the time of the three-yearly official revaluation in March last year, compared with £455.8m in 2013.
Industry insiders say few buyers are likely to be willing to take on the pension deficit, leaving Green with the option of negotiating a settlement with the pension regulator or giving a heavy dowry to any buyer.
The issue is a delicate one for Green, who last year paid £363m to resolve the pension deficit at BHS after months of bruising public criticism over his handling of the matter. MPs called at one point for him to be stripped of his knighthood.
It is not clear if Green plans to include Topshop and Topman in any sale.
He sold a 25% stake in the two chains to the them at £2bn. A shareholder agreement allowed either side to trigger a sale or float of the business after five years, a period which ended in December.