GUS to jettison 66 percent stake in Burberry |
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Thu, 26 May 2005 21:15
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GUS, the Argos and Homebase conglomerate, has announced that it plans to demerge its 66 percent stake in fashion house Burberry by the end of this year. The deal will reportedly net £1.1billion for GUS.
However, there was a delay in the separation of the Argos showroom business and Homebase DIY chain, from its Experian financial services arm.
Sir Victor Blank, GUS's chairman, revealed, "The board recognizes that there is no strategic logic in maintaining the Argos retail group, Experian and Burberry within the same group in the long term. We shall do it at the right time. We think that we can create value in the medium to long term, not just unlock a bit of value in the short term."
| The decision to separate retail and financial sides of the business was reviewed last year and following this GUS sold its 50 percent stake in South African furniture dealer Lewis earlier this month.
However, GUS shares registered a 3 per cent fall as the City took the delay in the separation badly. But John Peace, GUS's chief executive, said that the retail market did not appear healthy at this time and hence the delay. "It isn't a time to have the ARG (Argos Retail Group) management team distracted. There are a number of factors that influenced our decision. We are mindful of the UK retail conditions at the moment and didn't want to distract Terry Duddy [the Argos and Homebase chief executive] and his team. Nor did we want to distract the team at Experian." he declared. But Tony Shiret, retail analyst at Credit Suisse First Boston, opines confidently, "In terms of timing, it's still very much up in the air."
Mr. Peace said, "Corporate restructurings take a lot of time and frequently don't create much value. Sometimes there are greater benefits to invest and grow those businesses." An analyst responded by saying, "GUS moves at a glacial pace. They need a bit of global warming. I never expect John Peace to do anything decisive, so it wasn't a surprise. He's a dull old boy, but his record has been good."
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