By James Davey
LONDON, Feb 7 (Reuters) - British online domestic appliances retailer AO plans to list its shares on the London Stock Exchange in March, joining a rush of retail flotations and providing a big payday for Chief Executive John Roberts who founded the business in 2000.
The company will offer new shares to raise gross proceeds of about 60 million pounds ($98 million) and offer existing shares to be sold by the current owners.
Selling shareholders will include some of the firm’s directors, including Roberts - the largest shareholder with a stake of about 40 percent - as well as senior management and private investors.
Roberts, 40, said he would dispose of a minority of his holding. “This is not about a John Roberts exit, I will be the biggest shareholder on the other side of the IPO,” he told Reuters.
AO expects at least a quarter of its share capital to be floated in the sale.
Roberts declined to say what valuation AO was shooting for. The Financial Times reported last month that AO was aiming for a valuation of 1-1.2 billion pounds. The top end of that range would put it on a multiple of about three times annual sales.
Independent retail analyst Nick Bubb pointed out Dixons Retail, Britain’s No. 1 electricals retailer which sells appliances through its Currys chain and online and is more than 10 times the size of AO in terms of total sales, has a market capitalisation of 1.6 billion pounds.
AO plans to expand its product range, including a move into televisions, and will evaluate expansion in Europe, initially in Germany.
It said it was well placed to benefit from further growth in the UK online market for domestic appliances, which market researcher OC&C forecasts will grow at a compound annual rate of 11 percent from 2013 to 2016.
The listing of AO is one of many expected in Britain’s retail sector in 2014. Russian hypermarket chain Lenta and newsagent and convenience store McColl’s have both announced intentions to float in recent weeks.
Poundland, Pets at Home, Fat Face and House of Fraser are also expected to come to market later this year, seeking to capitalise from the UK’s gradually improving economy.
Roberts said AO stood out from the crowd because it had never had any private equity involvement, was debt free and had a growth story to tell.
“When you look at the pipeline of IPOs that are coming through a lot are re-heated private equity deals, or people needing to do an IPO to refinance or restructure their balance sheets,” he said.
AO has recruited Brian McBride, chairman of online fashion retailer ASOS, who is also a former managing director of Amazon in the UK, as its senior independent non-executive director.
AO, based in Bolton, north-west England, sells about 4,000 products from over 30 appliance brands, installs, removes and recycles old appliances.
It has a 24 percent share of the UK online market for major domestic appliances, such as fridges, freezers and ovens, making it the largest player in that market.
In the nine months to Dec. 31 2013 AO’s sales rose 43 percent to 281 million pounds and it made an operating profit of 4.7 million pounds.
AO employs just over 1,000 workers and, according to Roberts, has an obsessive focus on customer service. He said it has two guiding principles for staff: “One is, treat the customer how you would treat your own grandmother. The other is, if you have to tell your mum at the end of the day what you’ve done, would she be proud of the decision that you made?”