Green sells 25 percent of Topshop and frees Arcadia from deb

After having the whole industry talking for the past week, Sir Phillip Green has confirmed the sale a 25 percent stake in the Topshop and Topman retail chains to Leonard Green & Partners LP, a Los Angeles- based private-equity

firm that co-owns the J Crew fashion brand. The sale has valued the chains at 2 billion pounds.

“Being debt free gives us the balance sheet and flexibility to look at other opportunities to consolidate or acquire, either on our own or in partnership with LGP, who have substantial capital available in their new fund,” explained the owner of Arcadia Group Ltd. in declarations to Bloomberg.

The transaction leaves both Topshop and Arcadia free of bank debt and with positive cash balances, the retailer said in an estatement released to confirm the deal. Arcadia owner Taveta Investments Ltd. reported net debt of 308.9 million pounds at the end of its last financial year, recalled Reuters.

Sir Philip could now access to 600 million pounds of debt which can be raised against the newly separated company, according to the terms of the agreement. He said the debt, which Leonard Green has encouraged Topshop to raise for expansion, will for the time being “sit there as a piece of paper” but that it could be converted to bank funding when needed, reported ‘The Telegraph’.

The billion pounds price includes an enterprise value of 1.4billion pounds – with Leonard Green paying Arcadia 350 million pounds of cash for its 25 percent stake, explained the London journal.

However, the price tag was double the amount expected, reflecting the strength of the brands, according to Nick Bubb, an independent retail analyst who commented the news for Bloomberg. Also analysing the transaction, Honor Westnedge, an analyst at Verdict Research interviewed at Bloomberg Television London, pointed out that further expansion “would have been difficult if he tried to do it alone,” said, making the stake sale “a necessary move.”