British clothing chain Fat Face said on Thursday it had called off a planned 110-million-pound ($186 million) London stock market listing, as investors become more choosy due to a flood of flotations. The company, which is owned by European private equity firm Bridgepoint, had aimed to fund its international expansion via the listing of a 25 percent stake, which would have valued Fat Face at 440 million pounds.
Fat Face cited market conditions for pulling the listing, while analysts suggested Bridgepoint sought too high a price for the retailer of clothes targeted at an outdoor lifestyle. "Fat Face came at a full valuation, on the back of a number of floats that haven't performed great," said John Stevenson, analyst at Peel Hunt. "Valuation is key. At the right price you can get anything away, and it was the wrong valuation."
Bridgepoint holds around 77 percent of Fat Face. A 440-million-pound valuation would have given its stake a value of around 339 million, less than the 360 million it bought the firm for in 2007. Private equity firms generally hold companies for around 4-6 years before trying to list or sell them on at a profit. Fat Face began a recovery four years ago after racking up 225 million pounds in pre-tax losses. Bridgepoint brought in former Marks & Spencer director Anthony Thompson as Chief Executive to steer the company through the turnaround, and injected a further 25 million pounds into the business. Former Marks & Spencer head Stuart Rose joined as chairman in 2013.
Fat Face's core earnings (adjusted EBITDA) rose almost 28 percent to 32.1 million pounds in the 35-week period to February 2, 2014. The float would have given the firm a valuation of 13.7 times earnings, only a little less than the 14.1 times that its established British peer Next is trading at. Investors in initial public offerings typically demand a discount to a firm's peers due to the uncertainty that surrounds a new issuer's subsequent performance. Thompson said earlier in the month that the proceeds of the IPO would help the company set up a US website and several stores on the east coast of the United States.
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