Two private equity firms were yesterday considering a joint bid for Signet Group which, according to one report, was pitched at £2.3 billion, boosting shares in the UK-based jewellery retailer.
Apax Partners and Kohlberg Kravis Roberts (KKR) confirmed in a statement that they were considering an offer for the firm behind H Samuel and Ernest Jones shops in the UK and Kay Jewelers in the United States.
"No decision as to whether or not to progress with an offer has been made," Apax and KKR said in their statement.
Signet, which runs 1,847 shops, including a large number in the West Midlands, said in a statement that it had not received a bid approach.
Signet and Apax declined further comment and KKR could not immediately be reached.
Earlier yesterday, the London-based free newspaper City A.M. said the two private equity firms were working on a 132-pence-a share bid for Signet, a 30 percent premium to Wednesday's closing price.
Signet shares jumped as much as 19 per cent to a two-year high of 121-1/4 pence before easing back to trade up 15.8 per cent. "It's a good business. Market leader in the UK and United States," Seymour Pierce analyst Richard Ratner wrote in a research note.
He said the price reported in City A.M. was pitched at about 16 times Signet's forecast earnings and noted that smaller, upmarket rival Theo Fennell was already trading at around that level.
Signet yesterday reported a 7.9 per cent rise in second-quarter like-for-like sales, including an increase in the UK for the first time since the fourth quarter of its 2004-5 financial year.
The firm has suffered from slower UK consumer spending growth and higher precious metal prices, but this has been more than offset by stronger trading in the United States, where Signet makes over 70 per cent of sales.
UK like-for-like sales were up 0.6 per cent in the 13 weeks to July 29, while US like-for-like sales were up 10.3 per cent.
The growth in US total sales in the quarter is estimated to have been favourably affected by over three per cent as a result of a change in the timing of Mother's Day. The like-for-like sales comparison was similarly affected.
In the UK, H Samuel like-for-like sales were down by 0.9 per cent, while Ernest Jones like-for-like sales were up by 2.3 per cent. "In the second quarter, the US business experienced an excellent Mother's Day trading period, and a solid performance during June and July," said group chief executive Terry Burman.
Total sales were up 10.5 per cent at £390.9 million.
City A.M. said Apax and KKR were being advised by Goldman Sachs and were understood to have declared their intentions to Signet's board in recent weeks.
Signet said in June it had held talks about a possible merger with US rival Zale Corp, but that the discussions had come to nothing. Panmure Gordon analysts said Signet could support a further £750 million of debt and that the approach could have implications for other retailers such as electrical goods group Kesa which has also attracted private equity interest.
"Management that don't manage their cash flows and balance sheets more aggressively risk being displaced by those who will," they wrote in a research note.