The owner of Glasgow-based newsagent RS McColl has fired the starting gun on what analysts believe will be a raft of flotations in the retail sector, in a move that could value the company at about £225 million.
Parent company McColl’s Retail Group, which began life 40 years ago as a vending machine business, is seeking to raise about £50m by floating on the London Stock Exchange by the end of next month, potentially triggering a substantial windfall for founder and executive chairman James Lancaster.
The float would also allow private equity backer Caird Capital, headed by former Bank of Scotland executive Graeme Shankland, to cash in some of its investment. Caird, a joint venture between Bank of Scotland owner Lloyds Banking Group and Coller Capital, also has a stake in House of Fraser, another retailer believed to be eyeing a stock market listing this year.
Other private equity-backed firms that are understood to be exploring initial public offerings (IPOs) include fashion retailer Fat Face, Pets at Home and discount store chain Poundland.
McColl’s, which has 1,276 stores and generated sales of almost £870m last year, said it would use the proceeds from the float to reduce its debts.
Lancaster told The Scotsman that he had no immediate plans to take a step back from the business he founded in 1973 as he oversees its growth plans.
He added: “There are many thousands of independent stores that we would be in the market to buy from.
“Our advisers tell us there is good investor appetite for our investment case, and we think now is the time to become a publicly limited company.”
The firm aims to expand its branch network to about 1,350 outlets by the end of 2016, comprising 1,000 convenience stores and 350 newsagents, and is set to join the London market by the end of February.
As well as its 714-strong chain of McColl’s convenience stores, the retailer has 562 newsagents, which operate as RS McColl in Scotland and Martin’s south of the Border.
McColl’s said yesterday that trading over the festive season had been “positive”, with like-for-like sales rising 1.5 per cent in the six weeks to 5 January, helped by the growing popularity of convenience shopping.
Sainsbury’s, the UK’s second-largest grocer, said earlier this month that it now has more small-format stores than supermarkets.
According to industry researcher IGD, the UK’s convenience sector is on track to grow from £35.6 billion last year to £46.2bn in 2018, representing a compound annual growth rate of 5.3 per cent. That compares with predicted growth of 3.9 per cent in the overall grocery market, which was worth £170bn last year.
Independent retail analyst Nick Bubb said: “As well as its attractive industry position, McColl’s are plugging management experience as one of their unique selling points.”
Non-executive directors due to join the McColl’s board before its stock market debut include John Coleman, the former House of Fraser chief executive who is also a non-executive at Bonmarche, the budget fashion chain that floated in November.
Coleman will be joined by Sharon Brown – who spent 15 years as finance director at Lasswade-based Dobbies Garden Centres before leaving the Tesco-owned firm last year – and Georgina Harvey, the former head of newspaper publisher Trinity Mirror’s regional arm.