Flotations in doubt as New Look performs about-turn

The freezing of New Look's flotation plans is symptomatic of general problems among retailers Picture: PA

New Look followed Merlin Entertainment, owner of the London Eye and Legoland, and hotel bookings business Travelport this week in putting planned floats on hold.

New Look's about-turn on a sale was its second in three years, and the decision was seen as also raising doubts about other flotation hopefuls such as travel firm Amadeus and online grocer Ocado.

Both Merlin and Travelport are backed by the US private equity giant Blackstone, while New Look is owned by private equity groups Apax and Permira.

The IPOs are seen as having been shelved as investors proved unwilling to provide support at the flotation prices sought.

In a statement yesterday, New Look said that "in the light of the unfavourable market backdrop" it had decided against proceeding with its initial public offering of shares and listing on the main market.

Carl McPhail, group chief executive, said: "We have taken the difficult decision to postpone the initial public offering as a result of the considerable volatility in the equity markets."

McPhail added that the group would re-evaluate its options when market conditions improved.

Don Williams, head of retail at accountancy firm BDO, said: "The postponement of New Look's IPO should not be seen as an indication of trouble on the high street. It is still a buyer's market at a corporate level and as such prices must be realistic."

Amid some City expectations that Apax and Permira might now try to sell New Look to other private equity firms, one source said the company's owners were "not sellers at any price".

John Stevenson, retail analyst at KBC Peel Hunt, said: "The problem is the uncertain retail sector backdrop. The reality is that we have tax rises coming and disposable income is going to get a kicking this year – why would you pay a high (flotation] price when the sector is probably looking at flat to modest earnings growth?"

It is not known what price was being canvassed informally at New Look's recent marketing meetings for the IPO.

But one analyst said: "Ten years ago private equity was paying 10 times Ebitda (earnings before interest, tax, depreciation and amortisation] for retailers. That's out the window in this climate. Most quoted retailers are trading at about six times earnings."

Other potential deals have also hit the buffers this week as investors have fretted about the Greek debt crisis. An auction of retailer Matalan was shelved after private equity buyers baulked at the 1.5bn asking price.

The City is also cautious about private equity-backed companies in the wake of department store group Debenhams' poor performance since returning to the market in 2006 burdened with 1bn of debt.