(MergerMArket)
Chinese investors assess Alain Afflelou takeover this year, IPO not ruled out- sources
French eyewear retailer Alain Afflelou is in talks with undisclosed Chinese investors to explore a sale of the business this year after two IPO attempts in 1Q17 and 4Q16, two sources briefed on the situation and a banker following the situation said.
A person familiar with Alain Afflelou’s plans said there are several options on the table, including a sale, but declined to comment on what option is the preferred one, only adding more information will be disclosed before the end of June. The company has not completely ruled out another IPO attempt, the person added.
A spokesperson for Alain Afflelou declined to comment.
A Chinese buyer would likely seek to benefit from Alain Afflelou’s expertise and store network model and look to replicate it in the Chinese market, the first source briefed said. The Chinese offline eyewear retail market was worth EUR 5bn in 2016, according to the same source.
With revenues of EUR 344m, EBITDA of EUR 67.5m and net loss of EUR 9.1m in 2016, the company is likely to fetch a deal value of around EUR 1bn, both sources added.
Potential buyers are said to be considering options, the first source said. They can either meet the EV of around EUR 1bn, with EUR 300m debt included, or pay EUR 700m in EV and issue new bonds for EUR 300m in value, the first source added.
In the first scenario, buyers could expect net profit of EUR 55m-EUR 60m post-acquisition, while in the second one, buyers could expect net profit of EUR 45m-EUR 50m post-acquisition, the same source said.
The French eyewear retailer first announced plans to list towards the end of 2016 but decided to postpone its IPO plans at the end of November until 2017, due to market conditions at the time. Last February, Alain Afflelou confirmed that it had once again put its planned IPO on hold after the tie-up announcement between Luxottica [LUX:MIL] and Essilor [EPA:EI].
Growth prospects in the eyewear segment in France, which are threatened by an expected fall in the French healthcare system’s reimbursements for eyewear, may also play a role in the two previous failed attempts, as previously reported by this news service.
In the event of an IPO, Alain Afflelou could look at Grandvision [AMS:GNVN], Fielmann [ETR:FIE], and Luxottica as comparables, this news service previously reported, and could see a pre-money equity value between EUR 648m and EUR 998m.
As of July 2016 Alain Afflelou had 1,400 retail stores in 13 countries, of which 72% are in France (1016) and 28% in Spain (398), according to the company's website. The company announced its entry in the Chinese market in March 2016, with the first four stores opening in Chongqing and Chengdu in the Sichuan province, as per company reports.
The eponymous founder of Alain Afflelou still owns 14%, while Lion Capital holds 39% stake in the company. Lion Capital acquired its stake in 2012 and indicated an EV of EUR 800m, it was reported. The Caisse de dépôt et placement du Québec (CDPQ) owns 29%, Apax Partners owns 14%, and the remaining 4% is held by management, according to the company website.
Lion Capital and Apax Partners declined to comment. CDPQ did not respond to a request for comment.