Sir Philip Green Sells Topshop Stake

Mark Kleinman, City Editor
Sir Philip Green Sells Topshop Stake

Sir Philip Green, the high street billionaire, is to sell a chunk of his burgeoning Topshop empire to outside investors in a move that will cement his reputation as one of Britain's most successful businessmen.

I can exclusively reveal that Sir Philip is in advanced talks about selling a stake of up to 25% of Topman and Topshop. The deal, which is not yet finalised, is expected to value the two chains at close to £1bn, confirming their status as the most lucrative franchises in British fashion.

If completed, the spectacular move will add credence to Sir Philip's ambition of becoming a global retail magnate and will represent the latest in a string of deals which have transformed him as the most powerful man in the UK fashion business.

The buyer of the stake in Topshop and Topman, which will be ring-fenced from the rest of Sir Philip's fashion businesses as part of the transaction, is understood to be one of the joint owners of J Crew, the American clothing business.

Sources close to the talks said the deal was yet to be finalised but that an agreement could be announced as early as this week.

J Crew is owned by Leonard Green & Partners (LGP) and TPG Capital, two big American private equity firms which between them have backed companies such as Debenhams, the department store chain, and Neiman Marcus, the upmarket American retailer.

People close to the situation said that LGP, which is based in Los Angeles, had been in talks with Sir Philip about making an investment in Topshop for some time.

LGP also owns companies in the banking, consumer products and healthcare industries, and this year announced that it had raised a fund of $6.25bn to invest in the coming years.

TPG and LGP bought J Crew for about $3bn in November 2010. J Crew is run by Millard 'Mickey' Drexler, the former chief executive of Gap, one of the most successful US fashion exports of the past 25 years.

The spectacular deal to sell a stake in Topshop will be Sir Philip's most significant business transaction since he failed with his second attempt to buy Marks & Spencer eight years ago.

Since then, the women's fashion chain has enjoyed a period of soaring growth fuelled by its knack of producing on-trend clothing at affordable prices. Its partnership with the supermodel Kate Moss has also kept Topshop in the tabloid headlines and raised the profile of Sir Philip's business.

Sir Philip's latest deal will also mark a decade since he created the Arcadia fashion business following an £800m takeover that set him on the path to becoming one of Britain's wealthiest people. The Sunday Times Rich List reported this year that Sir Philip and wife Tina, the legal owner of the business, were worth £3.3bn.

Arcadia's six other brands, which include Dorothy Perkins and Miss Selfridge, will not be included in the transaction, according to people close to the discussions.

The funds from the stake sale will be used to accelerate Top Shop's international expansion. Sir Philip has been in talks with a wide range of potential investors and partners for several years as he targeted growth in the US and Asia.

Topshop outlets in the US have performed well since flagship stores opened in Chicago, Las Vegas and New York, fuelling the billionaire's ambition to open shops in a much larger number of markets. Earlier this year, he struck a deal with Nordstrom, the New York-listed department store chain, to sell Topshop and Topman-branded clothing in up to 100 outlets.

Sir Philip is understood to be determined that his staff do not see the sale of a stake in Topshop as undermining his commitment to the rest of his brands.

Arcadia employs 43,000 people and is one of Britain's biggest private sector employers. Sir Philip has defended the company's tax arrangements amid the escalating row over corporate taxes because the business is owned by his Monaco-based wife.

He pointed out last month that Arcadia had paid more than £2bn in tax since he acquired the business, including £591m in corporation tax.

Announcing Arcadia's annual results last month, Sir Philip said pre-tax profit had increased before exceptional items from £133.1m to £166.9m in the year to August 25.

Sir Philip also owns the BhS chain, which has struggled amid tough trading conditions on the high street. He has explored a sale of the chain in the past.

Goldman Sachs, Sir Philip's long-standing City adviser, is understood to have been working on the deal to sell a stake in Topshop for at least six months.

Sir Philip refused to comment on the talks to bring a new investor into Topshop and Topman on Tuesday night. LGP could not be reached for comment.