African investment heavyweight Brait SE said it will pay $1.2 billion for virtually all of budget clothes retailer New Look, giving it a substantial presence in Britain's fiercely competitive fashion retail market.
The deal puts Brait, whose top shareholder is South African retail mogul Christo Wiese, in the middle of the crowded British high street, where New Look vies with Primark, part of AB Foods, Next and H&M.
New Look, owned by private equity groups Apax and Permira, as well as founder Tom Singh, has 600 stores in the UK and Ireland and trades from a further 200 across Europe, North Africa, the Middle East and Asia including China where it wants to expand.
It is the second big deal in a month for Brait, one of Africa's largest investment houses which is also buying fitness chain Virgin Active. Brait will take a 90 percent equity stake in New Look for 780 million pounds ($1.23 billion), giving the retailer an enterprise value of 1.9 billion pounds, which includes 1 billion pounds in debt.
The remaining stake will stay in the hands of the founder family and management.
New Look had been eyeing a stock market listing when Brait swooped, with chief executive Anders Kristiansen telling reporters in February that the retailer was ready for floatation.
However, Nick Bubb, an independent retail analyst in London, said an IPO may not have made sense for New Look, which has ambitions to grow in China, the world's most populous country.
"An IPO never looked a runner given New Look’s very chequered UK history and the unproven Chinese potential,” Bubb said.
"Whether New Look’s recent revival can be sustained is another matter, given the surplus capacity in the UK fast fashion market."
New Look, which also operates in France, Poland and Belgium, pulled a planned stock market listing in 2010 amid turbulent financial markets.
Shares in Johannesburg-listed Brait jumped more than 3 percent shortly before giving up some of the gains to trade 2.12 percent higher at 92.83 rand - valuing it at $4 billion.
Brait raised 8.6 billion rand ($730 million) in 2011 - at the time South Africa's largest ever capital raising - by increasing the size of its publicly owned shares.
It has stuck with its strategy of investing in private companies, including British supermarket chain Iceland Foods and South Africa's Premier Foods, the biggest maker of local staples such as maize meal and bread.
Last month, it announced a $1 billion deal to buy Virgin Active, using some of the 26 billion rand it made from selling its stake in Pepkor, Africa's biggest budget clothes retailer, in a deal that intercepted a planned initial public offering.
New Look was advised by Goldman Sachs International, JP Morgan Cazenove, Clifford Chance and Price Waterhouse Cooper while Rand Merchant Bank, a unit for FirstRand, and Nomura International advised Brait.