Tuesday 20 March 2018

Apollo eyes up Galen Weston's €140m-valued stake in Arnotts

Bid could end masterplan for store

Arnotts department store on Dublin’s Henry Street.
Arnotts department store on Dublin’s Henry Street.
Sarah McCabe

Sarah McCabe

APOLLO has set its sights on Galen Weston's €140m stake in Arnotts in a move that could derail the Brown Thomas owner's bid to transform Ireland's department store landscape.

The New York-based investment firm's successful grab of a 50 per cent interest in the department store put up for sale by IBRC, in the form of loans with a face value of €230m, came as a surprise to the market and a blow to Fitzwilliam Finance, the Weston vehicle which bought the other 50 per cent stake from Ulster Bank.

Fitzwilliam is also backed by Noel Smyth, the solicitor-turned-developer.

Now Apollo, which is advised by former Bank of Ireland boss Brian Goggin, is understood to be vying for control of the entire asset – which includes retailer Boyers and a four-acre tract of development sites in Dublin city centre known as the Northern Quarter alongside the landmark department store.

The news comes just two weeks after the Competition Authority approved Apollo and Fitzwilliam's ownership of the property, surprising many market insiders.

If successful, Apollo's bid could spell the end of the Westons' retail masterplan to reposition Brown Thomas and Arnotts as leaders in the luxury and mid-range market respectively.

The Canadian billionaire has already begun a revamp of Brown Thomas aimed at reorientating it towards luxury selling. This includes an €8.5m revamp of its Dublin store, introducing more high-end brands and individual in-store "boutiques" for luxury names like Celine, Prada and Tiffany.

The store's entire ground floor beauty hall is being moved into its old luxury hall, a more decorative space. The project will be completed by the end of the year.

Personal shoppers for beauty are also being rolled out alongside new cosmetic brands like Charlotte Tilbury. The move is partly motivated by a desire to target wealthy foreign designers, and partly by a recovery in Irish consumer habits and a return to "investment" purchases like leather handbags.

A repositioning for Arnotts was also intended, designed to bring the brand back to its traditional position as a mid-range seller.

Boom-time attempts by Arnotts to compete with Brown Thomas, including raising price points and introducing high-end American brands, proved unpopular with shoppers and were slammed by retail experts.

The Westons wanted to remodel it based on John Lewis, the hugely successful British mid-range department store. Apollo's purchase of a 50 per cent stake was not seen as a dealbreaker for these proposals; rumours suggested co-management might be an option, or that Fitzwilliam would seek to buy the stake from Apollo.

But the latter's open bid for control of the entire asset could be a death knoll for the plans. The €82bn asset management firm has not made its intention for Arnotts clear. The group's other Irish investments are not retail-specific. They include a €1.8bn portfolio of Irish commercial real estate bought from Bank of Scotland, and the group is also believed to be bidding on part of a former Sean Dunne/ Nama property portfolio.

Sunday Indo Business

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