Sir Philip Green pays $1 for 25% Top Shop stake

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Sir Philip Green’s high street empire paid just $ 1 (76p) to buy back his private equity partner’s 25% stake in Top Shop and Top Man, underlining the challenges facing the billionaire tycoon.

Sky News has learnt that‎ Arcadia Group acquired the stake – which was valued at £500m in 2012 when Sir Philip sold it – from Leonard Green & Partners, a US-based buyout firm, for the sum several weeks ago.

The ‎token dollar value for the shareholding in Top Shop/Top Man Limited (TSTM) illustrates the difficulties that Sir Philip faces as he prepares to launch a radical restructuring of his business.

Leonard Green – which has no formal relationship with its namesake – has the option to reacquire the stake in future, according to a statement issued by the investment group earlier this week.

Although it had already written down the value of its shareholding in Arcadia’s flagship brands‎, the fact that it was sold for just $ 1 is likely to stun retail analysts.

In its announcement, Leonard Green said the deal had been carried out because it “simplifies the shareholding structure of TSTM and enables the Arcadia board to focus on the restructuring options currently being considered”.

“LGP remains supportive of the business and has the opportunity to repurchase its stake in TSTM in the future.”

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As Sky News revealed last week, much of the focus of Sir Philip’s restructuring is on negotiating a substantial reduction of its £50m annual contributions to Arcadia’s pension schemes.

The Pensions Regulator (TPR) is also facing scrutiny from parliament over the proposals following criticism of the watchdog’s role ahead previous corporate collapses ‎- notably at BHS, which went bust a year after Sir Philip offloaded it.

A triennial review of Arcadia’s pension deficit based on the schemes’ position at the end of March is expected to produce a renewed valuation shortly, with sources saying that the current shortfall on a conventional funding basis stands at roughly £550m.

Arcadia’s plan to cut its pension funding forms part of a wider restructuring that will entail the closure of dozens of stores.

Shoppers are unlikely to boycott Topshop in their droves. File pic
Image: Advisers are said to be working towards a formal launch of the Arcadia CVA by early May

Under the company’s initial proposals, retirement scheme members also face seeing their benefits reduced through a planned switch from RPI to the lower CPI measure of calculating annual payment uplifts.

Sources said that would eliminate as much as “a couple of hundred million pounds” from the deficit calculation.

Arcadia, which employs about 18,000 people, wants to implement store closures and rent cuts being implemented through a Company Voluntary Arrangement (CVA).

This week, the company said it was appointing Jamie Smith and Peter Bloxham, two corporate restructuring veterans, as interim chairman and non-executive director respectively.

CVAs have been widely used by retailers such as Carpetright, Mothercare and New Look in the last two years as trading conditions on the high street have deteriorated.

Debenhams, which went through a pre-pack administration on Tuesday before being taken over by its lenders, is also planning a CVA.

While the proposal to reduce Arcadia’s pension contributions risks further undermining Sir Philip’s reputation, a restructured business with lower overheads would have a better chance of surviving the current retail maelstrom.

Sir Philip is playing a peripheral role in the current talks and is said to be adopting an increasingly distant approach to the business which helped catapult his family into the ranks of Britain’s wealthiest people.

Advisers are said to be working towards a formal launch of the Arcadia CVA by early May, although the timetable could yet slip.

The financial restructuring comes at a delicate time for Sir Philip, who has been embroiled in a storm over his behaviour towards Arcadia employees and his use of non-disclosure agreements to prevent former workers discussing their severance packages.

An Arcadia spokesman declined to comment.

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