High street fashion chain Primark is to become an independent listed company under a plan announced by its parent group Associated British Foods.
ABF’s other business, FoodCo, will also be listed, with its shareholders retaining stakes in both businesses.
The move aims to provide clearer investment propositions and enhance investor understanding for each distinct business.
Primark has 486 global stores and revenue of about £9.5 billion. FoodCo generates about £9.8bn in annual revenue across 52 countries.
The demerger is expected to incur approximately £75 million in one-off separation costs.
Both Primark and FoodCo are anticipated to be listed on the London Stock Exchange and potentially become FTSE 100 constituents, with the demerger intended to be effective before the end of 2027.
ABF’s largest shareholder. Wittington is supportive of the proposed demerger and remains committed to maintaining majority ownership of both Primark and FoodCo.
Michael McLintock, chair of ABF, said: “The board has now completed its in-depth review of the structure of ABF and has concluded that a demerger of Primark is the best way to maximise long-term returns for shareholders, reflecting Primark’s scale today and the need for a better understanding of the Food business.
“The opportunities ahead for both Primark and FoodCo are considerable and the board firmly believes that each will thrive as an independent entity.”
George Weston, chief executive, said: “This is an important step in the evolution of ABF. For our Food business, the separation will enable greater understanding of the breadth and strength of our differentiated portfolio and its long-term growth opportunities as the only FTSE100 pure play food producer.
“For Primark, it enables the creation of appropriate governance to maximise the future potential offered by Primark’s powerful brand, strong customer proposition and opportunities in existing and new markets.”
Market reaction
Dan Coatsworth, head of markets at AJ Bell, says: “For years, ABF said it would never split Primark from the group, arguing that a conglomerate structure provided added benefits.
“However, the bigger Primark has got, the stronger the call to let it stand on its own. ABF has finally buckled and pressed the button on the demerger.
“There is the potential for Primark to trade on a higher valuation as a standalone listed business. ABF currently trades on 10.7 times next 12 months’ expected earnings. Conglomerates often trade at a discount to reflect a sprawling empire of interests. Next trades on 16.8 times forward earnings – a much higher rating versus ABF.
“Primark is one of the biggest retail success stories of the past two decades. It has shown the future of retail is not dependent on the internet, with physical stores still a solid way to make money.
“Its secret sauce is a mixture of attractively priced products, good stock levels, large stores, and an eye on the latest fashion. Primark’s products are relevant and affordable, and the company has shown it can make money on low margin items by running the business efficiently and with a close eye on costs.
“Demerging from a conglomerate parent could lead to faster decision making and freedom to explore new growth opportunities. That could involve expanding into new countries or adding smaller stores in high footfall locations that only stock the most popular items.”
#Primark #independent #listed #company #Daily #Business