The legal owners of Selfridges have begun an auction for the department stores, just weeks after the death of Galen Weston, the head of the family. The Weston family has hired advisers from Credit Suisse, and plan to send out details to a set of potential buyers. But, in the immediate aftermath of the lockdowns caused by Covid-19, which have ravaged stores and shopping centres with closures and a severe drop in sales, is an auction really the best decision? Auctions and pandemics don’t exactly compliment one another.
As per, we will ask and aspire to answer the important and really serious questions. Why is Selfridges up for sale? Who is likely, or unlikely, to buy it? And most important of all… why can’t I afford anything they sell there?
To find out, tune into next week’s episode of According To A Law Student. Just kidding, keep reading.
Golf, Guns and Galen:
To provide some context to this auction, and hopefully some sentiment, let’s explore the history of Selfridges.
Founded in 1909 by Harry Selfridge, the first store opened on Oxford Street, London. The store was successful, and was home to over 100 departments, including a mini golf course and an all-girl shooting club. Selfridges was revitalised in the 1990s by Vittorio Radice, an Italian retail maestro, who introduced more upmarket brands, renovated the store interior, and began the brand’s growth outside of London. Galen Weston acquired Selfridges in 2003 for a casual £628 million, and constantly renovated and updated the stores throughout the 2000s.
Fast-forward to today, and Selfridges consists of 4 UK stores: Oxford Street, Birmingham’s Bull Ring store, and the Exchange Square and Trafford Centre stores in Manchester. Throughout the UK and beyond, Selfridges has become a reputable, recognisable brand — it is even depicted in Wonder Woman.
The Weston family has set a guide price for the brand at £4 billion. Yes,four billion.
If the auction is successful, the Westons are looking at a tidy profit… but will anyone pay it?
The Potential Clientele:
You might think that there are very few people who are rich and powerful enough to splash out £4 billion. It turns out there are loads.
Potential Buyers Include:
- Thailand’s Central Retail Group — a division of which is already headed by prior Selfridges boss, Radice.
- Hong Kong’s The Lane Crawford Joyce Group — the previous workplace of current Selfridges boss, Andrew Keith.
- The Qatar Investment Authority — which already own Harrods (did someone say luxury department store monopoly?)
Whilst these massive investment groups and businesses might be incredibly rich, they aren’t incredibly stupid… and buying a business which has suffered a huge hit due to an ongoing pandemic, doesn’t seem like a smart move.
To Sell Or Not To Sell?
Acquiring Selfridges sounds like a great idea to me. In the year preceding February 2020, Selfridge’s sales increased by 7% to £1.97 billion. However, in the same period, profits fell by 10%, to just £88 million. Take into account the next year, during which the stores were all closed for months at a time, and Selfridges begins to look much less desirable. Factor in the Selfridges website, and the stores themselves have, to an extent, become somewhat redundant.
That said, here are the main pros and cons of the auction…
The Pros:
- Quit while you are ahead?: Given the trend towards store closures throughout high street stores and big brands alike, Selfridges may end up closing some of its stores — is it better to sell now and avoid any chance of loss later?
- A tidy profit: As mentioned earlier, if Selfridges get the £4 billion it is asking for, the Westons will have made a massive profit.
The Cons:
- Selfridges could be more successful: The Weston family may fear a decline in sales, but perhaps a public offering is a better method of sale? Think about it. The family could buy a majority of shares, thus maintaining a controlling interest without being burdened with the full cost of maintaining the brand?
- Money moves: There is a chance that no bidder will fork out the hefty sum that the Weston family are asking for, especially in the aftermath of a pandemic.
- Playing the post-pandemic field: Selfridges may yet recover from the effects of the pandemic — whilst the Weston family’s asking price is already extremely lucrative, if the family wait until Selfridges is fully recovered from store closures, could they bump up the asking price even more?
The Legal Perspective:
The infographic below explores some of the legal issues and conundrums a law firm might face when overseeing the transition of Selfridges to its potential new owner.
Conclusion:
If the auction is successful, other luxury department store owners may well follow in the Weston family’s footsteps: if they can sell a company for nearly 6 times(!) the amount they bought it for, immediately after a pandemic also, then perhaps others can too.
This opens up more opportunities for law firms, in particular, those specialising in mergers and acquisitions (M&A). However, with the internet constantly overshadowing the limited success of department stores and high street brands alike, how many more of these auctions are we realistically likely to see?
Will we continue to see corporate sales and mergers on such a large scale in the future, or are stores like Selfridges destined to close, whether in the long term, or in the very near future?
Regardless, whether they are merging, acquiring, buying or selling… they still need a lawyer.
This article was written by Toby Johnston. Toby is a Content Writer for According To A Law Student and second-year Law LLB student at the University of Liverpool. Toby has aspirations to become a corporate solicitor.
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