Buoyant float from B&M as owners enjoy £1bn payday

DISCOUNT retailer B&M yesterday proved there is still an appetite for flotations on the London Stock Exchange as its first day of trading saw the company’s value grow to almost £3 billion.

B&M is seen as a modern-day Woolworths. Picture: Alan Watson

The Liverpool-based chain, set up in 1978 and now among the UK’s biggest retailers with 373 stores and 16,000 staff, saw its shares rise in conditional dealings from an opening price of 270p to more than 290p at one stage.

The initial puplic offering (IPO) valued the chain at £2.7bn, and delivered a £1bn windfall for its backers.

It is the second bumper payday from B&M for Manchester-based brothers Simon, Bobby and Robin Arora, who bought the chain in 2004 when it had 20 stores. They received an estimated £900m when they sold a controlling stake to private equity firm Clayton, Dubilier & Rice (CD&R) in December 2012.

This time around the selling shareholders, including the Aroras and funds managed by CD&R, will pocket £1bn. The company itself raised £75m that will be used to fund further expansion, in the UK and into Europe.

Around 40 per cent of the shares are being made available in the float, which also marks a triumphant return to the City for former Tesco chief executive Sir Terry Leahy.

Leahy, right, who became chairman of B&M 18 months ago as it prepared to go public, could even be set for a return to London’s top flight – the share price currently puts the company within striking distance of the £3bn valuation needed to be considered as a constituent of the FTSE 100 Index.

Seen as a modern-day Woolworths, B&M has boosted its fortunes in recent years by branching out into clothes, pet food and toiletries, as well as through the opening of more stores away from its north of England heartland. It has said it believes there is potential for up to 600 outlets.

Chief executive Simon Arora said: “We are delighted that investors have demonstrated their support for B&M and its growth story in the value sector and that they share our excitement about the group’s future.

“We believe that becoming a public company gives us the right long-term ownership model, allowing us to move to the next stage of development.

“We look forward to continuing to offer incredible value, to bring the B&M experience to more people as we roll out stores and to breathe life into high streets and retail parks across Britain, creating thousands of jobs each year.”

Flotation brokers will have been relieved to see strong demand for B&M’s shares, which were priced in the upper half of its initial range.

A raft of retailers, including Card Factory, Pets at Home and Poundland, have already floated this year, but some have seen their prices drift below the initial offer. Surfing-inspired fashion chain Fat Face last week pulled its planned £110m IPO, citing “current equity market ­conditions”.