The clothing retail giant Next is in talks with a prominent American investment firm about a joint bid to gain control of Sir Philip Green’s high street empire.
Sky News has learnt that Next and Davidson Kempner Capital Management are holding detailed discussions about a combined offer for Arcadia, which collapsed into administration last month.
Sources said on Friday that the two companies were “likely, but not certain” to bid for Arcadia – home to Topshop, Burton and Miss Selfridge – ahead of a revised deadline next Monday.
Under the plans being discussed by Next and Davidson Kempner, the US-based firm would provide the majority of the funding required to complete a takeover.
Davidson Kempner would probably own the majority of the business after any deal.
A sale process being run by Deloitte, Arcadia’s administrator, has drawn interest from bidders including Mike Ashley’s Frasers Group, Authentic Brands – the American owner of department store Barneys – and Boohoo Group, the online fashion retailer.
Insiders said that Next could yet decide not to table an offer for Arcadia, and pointed out that the company run by Lord Wolfson had also been holding talks with other financing partners.
These are said to have included Carlyle, the private equity firm, and Alteri Investors, the specialist retail turnaround firm.
Davidson Kempner has become an increasingly prominent player in UK-focused corporate situations, including lending £170m to Virgin Atlantic Airways as part of the carrier’s rescue deal earlier this year.
It also acquired the Oak Furnitureland chain through a pre-pack administration during the summer.
For Next, a partnership with a third-party investor would effectively outsource the dealmaking element of a prospective takeover of Arcadia.
It would also enable the clothing retailing giant to take a ‘capital-light’ approach to expanding its range of brands, following a similar – albeit smaller – deal with Victoria’s Secret several months ago.
One source said that if a Next-Davidson Kempner offer was successful, Lord Wolfson would be keen to keep a substantial number of Topshop outlets trading.
Up to 13,000 jobs are at risk from Arcadia’s collapse, with brands including Evans, Wallis and Outfit seen as less likely to attract bidders.
Next is thought to be among a small number of bidders exploring a takeover of the whole of Arcadia.
The demise of Sir Philip’s empire follows the failure of retailers such as Cath Kidston, Oasis and Warehouse and Debenhams as the coronavirus crisis has exacerbated the financial pain being experienced across the British high street.
Debenhams’ future is also hanging in the balance amid last-ditch rescue talks with Mr Ashley.
It is Arcadia’s appointment of administrators that is likely to emerge as the most enduring symbol of the pandemic’s impact on the economy.
Sir Philip bought the high street group in 2002 for £850m, and just three years later paid what remains one of the largest-ever dividends – £1.2bn – to Arcadia’s registered owner, Lady Christina.
For years, he was feted as a high street colossus, advising David Cameron on public sector waste during his period as prime minister.
In 2012, he sold a 25% stake in Topshop’s immediate holding company to Leonard Green & Partners, a private equity firm, valuing the fashion chain at £2bn.
Sir Philip was later to buy it back for just $1.
His decision to sell the department store chain BHS in 2015 for £1 to Dominic Chappell, a former bankrupt who was recently jailed for tax evasion, set off a chain of events which cost Sir Philip his reputation and much of his fortune.
BHS collapsed just a year after that deal, sparking a bitter row about Sir Philip’s responsibilities towards its pensioners.
In early 2017, Sir Philip struck a deal with pensions watchdogs to pay more than £360m to the BHS scheme and which set the tone for negotiations over Arcadia’s retirement fund two years later.
Last year, the tycoon narrowly secured approval for a company voluntary arrangement at Arcadia, but was forced to pledge a package of assets worth more than £400m to the company’s pension scheme.
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