16 Retail Week March 2, 2018 Could Sir Philip pull off a deal? Reports of an Arcadia sale were strongly denied by Green last week. However, should he opt to offload his stable, what would he need to do? Becky Waller-Davies reports eports that Sir Philip Green is in the to get to the point where a new owner can sign process of selling Arcadia to Chinese on the dotted line. textiles firm Shandong Ruyi have been Retail Week takes a look at some of the aggressively rebutted. challenges and opportunities. RAccording to The Sunday Times, Green and Shandong Ruyi were in talks over a Potential opportunities potential deal. Arcadia's brands have been struggling for But Green issued a typically combative some time, and like-for-likes are understood denial, pouring cold water on talk of a sale to have been in freefall, even at jewel-in-the- and attacking journalist Oliver Shah, who crown Topshop. is writing a book about Green, for using "the Arcadia's brands sit squarely in the mid- front page of a prominent Sunday newspaper market and it has haemorrhaged talent over the for a totally false story and his own personal past year. At present, many think it is a disad• vanity project". vantaged player in a dog-eat-dog market. A spokesman insisted that Arcadia was So, in order to attract a halfway decent offer, "not in discussions with any party regarding a Arcadia needs to undergo significant changes group. Price is the first person charged with partial or total disposal". or give any buyer a substantial dowry. overseeing both Topshop and Topman. His However, many in the retail industry were While Arcadia is currently trading poorly, predecessors, Mary Homer and Philip Cooke, not surprised at the suggestion that Green has the brand cache of Topshop/Topman, the scale were managing directors of Topshop and been contemplating a sale of some or all of of the business and its history on the British Topman respectively. Arcadia's brands. high street could make it an attractive trophy Price has been at the helm for a little mgn sin If the tycoon did want to sell Arcadia asset to some investors. under six months - so far he has stripped ^^^^^^ at some point, could he secure a deal? Arcadia has a vast store estate out a layer of middle management in-store Some observers believe that but it has not yet fully exploited and closed the estate for a day for a merchan• the damage to his personal the potential of online or market• dising refresh, but little else is known of his reputation in the aftermath of US investor Leonard places such as Asos and Zalando, plans for the businesses. BHS' demise, coupled with the Green's stakeinTopsriop which could really light a fire While they have their problems, both trading difficulties faced by many anrJTapman ' under its sales. Topshop and Topman are still fundamentally bricks-and-mortar fashion retailers, Take, for example, New Look, strong with great brand value and good product. could lead to him wanting to sell up. which saw its third-partv online sales Their issues have more to do with intense This would be a watershed moment given rocket 21.9% while its own online sales fell competition from etailers and a strong showing Green's towering presence on the 15% over the 39 weeks to December 23. from players such as Zara - and it doesn't help UK high street for many decades. Another opportunity would be for Green to that Topshop's prices outstrip both of those However, any potential deal would be be architect of the turnaround of Topshop and despite targeting the same market segments. fraught with complications. stablemate Topman, both of which still hold From a hefty pension fund deficit - although significant brand power. Anglo-American relations payments are being made into Arcadia's Many believed the appointment of Paul A turnaround would be very challenging and schemes - to ongoing p o or trading and Green's Price as joint chief executive of Topshop/ require substantial investment but could please reputational issues post-BHS, the pugnacious Topman was the first step in splitting the US investor Leonard Green, which owns a 25% billionaire would need to address many issues business away from the rest of the Arcadia stake in the two chains. March 2, 2018 Retail Week 17 Follow Arcadia's ongoing woes with our news and analysis Retail-Week.com/Arcadia Finding a buyer would A turnaround of the Arcadia group seems Arcadia is currently paying £50m a year difficult to pull off without a significant into its pension scheme, which is in deficit by be a significant re-engineering of strategy and assets. £565m on an ongoing basis or almost £lbn on While some brands, such as Miss Selfridge, a buyout basis. At its current rate, it expects to challenge even could continue to carve a niche for themselves, close the deficit in eight to nine years. other brands look ill-equipped for competition But because of what happened at BHS - without Arcadia's on the high street. even though it was not under his ownership at pension deficit and This includes brands such as Burton, which the time of collapse - all eyes will be on Green has lost its relevance, and Dorothy Perkins, whatever the terms of any deal. the political sensitivity which has increasingly turned to discounting. "The political scrutiny around any deal That means any prospective buyer would need specifically will be very difficult," one source that surrounds it deep pockets. said. "We all know there is a pension issue Companies linked to Arcadia and Green own there, and after BHS, whatever happens there much of the fashion group's store portfolio. will be looked at very closely." Any buyer of the group would have to accept "The deal parameters are very different that Green would effectively be its landlord. this time around," one expert commented. Leonard Green acquired that stake in However, this could work to their advantage "He has to be seen to be whiter than white December 2012 via a shareholder agreement as Green would have the power to grant after BHS." that allowed either party to trigger a sale or float significant reductions and to end leases as and Of course, many deals are done despite of the business after five years. where he sees fit. difficult owners, pension issues or plummeting That five years has now come to an end and like-for-likes. But, in the words of one source, Leonard Green is understandably keen to ensure Pension problems this combination of circumstances represents that its investment does not deteriorate further. Finding a buyer would be a significant chal• "atoxic cocktail". Sir Philip may have the added pressure of lenge even without Arcadia's pension deficit Green will be hoping to find someone who Leonard Green looking for its paydav. and the political sensitivity that surrounds it. can stomach it. .