Brett Blundy outlays $40m for stake in Best & Less ahead of IPO

Best & Less looks to be ramping up its IPO plans again.

Retail billionaire Brett Blundy is throwing his support behind Best & Less, offering a $40m cash injection into the business as it moves to once again ramp up its initial public offering plans.

Mr Blundy has backed a number of high profile retailers that have headed to the boards, including Adairs, Dusk, Lovisa and Universal Store. The latest deal will see him own 16.4 per cent of Best & Less.

Best & Less, which is 80 per cent owned by private equity firm Allegro Funds and the rest owned by management, shelved its IPO plans last month after it failed to gain traction with investors.

Now it hopes to raise about $60m at $2.16 per share with the same $271.2m market value.

Earlier, the raise was to be about $72.3m.

Mr Blundy chairs BB Retail Capital and has had success with the floats of companies he has backed.

He has sold businesses including Bras N Things, a retailer snapped up by US company Hanes in 2018 for $500m, and jewellery chain Lovisa, which he founded in 2010 and was listed in 2014 with a $210m market value.

Adairs was listed in 2015 with a $398m market value and his Aventus Property Group also floated in 2015 with a $686.5m market value.

Universal Store listed last year and is now worth $534m.

The earlier IPO plans for Best and Less would have seen Allegro offload about 30 per cent of its stake.

The latest deal comes at a time that traditional retail operators remain out of favour with many investors and due to the global pandemic, future earnings remain hard to predict.

Earlier, Allegro Funds had been hoping to lock in a valuation of eight to nine times its forecast annual net profit or five to six times its forecast $60m of earnings before interest and tax for 2021.

But market sources had been saying it was slated to price at around four or five times EBIT, equating to $240m-$300m.

The latest deal sees Best & Less price at about seven times its net profit for the 2021 calendar year.

Macquarie Capital and Bell Potter have been working on the float. Best & Less generates most of its money from children’s and babies’ clothing.

Collectively, it has more than 250 stores across Australia and New Zealand and employs more than 4000 people.

The discount clothing and household linens chain was purchased by Allegro Funds Management in 2019 from the local arm of Steinhoff International, Greenlit Brands.

The acquisition was part of a wider deal by Allegro in which it also purchased Harris Scarfe, which was later placed into receivership and sold off to the Spotlight Group.