Reiss is for sale says report, but outcome may actually see Next growing its stake

By

Sandra Halliday

Published
Jun 14, 2023

We’ve become very used to retail giant Next buying businesses, but less so about it selling them. However, a report has emerged that it's looking at a sale of Reiss.

But that report also suggested it could be an exploratory process to establish a value and could even mean Next buying a bigger stake in the firm.

So what’s going on? Next is the biggest shareholder of the premium fashion chain having acquired a large minority stake followed by a controlling stake in recent years.

Now Sky news has said it and fellow shareholder Warburg Pincus are working with bankers on an auction of the business that could see it valued at £500 million.

The company was founded by David Reiss in 1971 and is a major player in the UK premium fashion market.

The report said the auction is “in its second round, with a number of buyers circling”.

Unlike many sales in the UK fashion sector in recent periods, this wouldn’t be one of an underperforming or struggling company. That £500 million price tag speculation is based on expected profits on an EBITDA basis for the current financial year of almost £65 million.

This would, of course, raise the question of why acquisitive Next would want to sell. And the report also cited “a person close to Next” casting doubt on whether it would sell its 51% stake.

There was a suggestion from “a senior retail executive” that it may be aiming to establish a market price “and then acquire Warburg Pincus's remaining interest”.

The current process is soliciting offers for the whole business, Sky said, but while it had suggested Next could end up buying its partner’s holding, it also said it may hang on to its stake alongside a new investor.

As mentioned, Next is more use to acquiring businesses than selling them, including recent years having seen deals to represent brands like Victoria's Secret and Gap in the UK, while buying JoJo Maman Bebe and Joules.

It has a strong balance sheet that gives it the power to step in and acquire businesses without taking on major debt.

It first bought a 25% stake in Reiss from Warburg Pincus in 2021 and exercised its right to buy a majority holding last year.

Reiss operates its online business via the Next Total Platform and also runs over 60 UK stores, with more openings planned for its small (seven stores) US chain.

As is to be expected in these circumstances, none of the parties concerned have commented, Sky said.