Baugur boss Jon Asgeir Johannesson says the Icelandic company is still looking to buy retail business despite a tougher financing climate.
Speaking at the World Retail Congress uesterday in Barcelona Johannesson, executive chairman of the Icelandic retailer investor, said: ‘We are looking abroad and in the UK and at growing our businesses through e-commerce. We think the department store sector still has growth as consumers have less time to shop and will want to shop in one place.’
Baugur already owns a host of UK retailers including House of Fraser, Hamleys and supermarket Iceland.
On Tuesday its sold its media and technology interests and its stake in Icelandic investment business FL Group, raising more than £400m to invest in opportunities arising from the fallout from the credit crunch.
Johannesson (pictured) said the credit crunch would only reduce but not stop the number of private equity deals in retail.
He said: ‘Now we need more equity to do deals. It has dropped from 10-11 times EBITDA to four times EBITDA. But equally values have dropped. Last year you could put in 5 times EBITDA as equity and get a return of six times. Now you can put same amount of equity in but no debt as values of businesses have fallen and so has availability of debt.’
Johannesson also said that retailers should hold onto their property or retain a form of ownership in order to get the best out of the business.
‘Try to hold onto the property. It has been easy in the past to raise money against property and do a sale and leaseback. There are many ways of doing this and there are ways of working with a property company who will take care of the property. But the most important thing is to focus on the retail business.’
MFI private equity backer Merchant Equity Partners agreed.
MEP managing partner and chief executive Henry Jackson, said: ‘If you hold on to the property and improve the business firstly you can then add value to the business and add value to the property through improving the retail business. It is not always right to sell the property.’