One of Britain’s biggest retailers could be setting the stage for what could be one of Orange County’s largest public offerings.
London-based GUS PLC, which runs stores and a catalog business, could offer word on a spinoff of Costa Mesa’s Experian Information Solutions Inc. as soon as next week.
GUS, operator of Great Universal and Argos stores in Britain, is in the midst of a review of its operations. Analysts expect Experian to be split off as a result.
Details are scarce for now. If it comes down to a spinoff, Experian likely would list on a U.S. exchange with Costa Mesa being the company’s base, according to analysts.
Experian, best known for its credit reporting business, could fetch a market value of $3.8 billion to $5.6 billion, according to Nick Bubb, an analyst with Evolution Securities in London.
One of Experian’s biggest rivals, Equifax Inc., had a recent market value of $4.5 billion.
Experian could rank among the largest public companies based in OC by market value, somewhere behind Irvine-based Broadcom Corp., Allergan Inc. of Irvine and Cypress-based PacifiCare Health Systems Inc.
“This is a big deal by any standard,” said Murray Rudin, an Irvine-based partner with Los Angeles private equity firm Riordan, Lewis & Hadden LLC. “A new $5 billion company isn’t created very often. The Merrills and Morgan Stanleys will fight to the death for a piece of this action.”
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Robert: oversees $2.5 billion in yearly sales |
Experian counts yearly sales of about $2.5 billion and about 1,250 workers in Costa Mesa.
Speculation of an Experian spinoff started about a year ago when GUS said it would begin to “review all strategic options.” The company is about half way through the review but could offer some clues when it reports financial results next week.
“No decisions have been made with regard to any of the companies within the GUS portfolio,” said Don Robert, Experian’s Costa Mesa-based chief executive, in an e-mail.
Experian no longer fits within GUS, according to analysts. GUS used to be more of a holding company but now is focused on stores, including British chains Argos and Homebase.
By contrast, Experian offers credit rating services and has branched into other areas, as with the pending acquisition of Santa Monica Web site operator LowerMyBills Inc.
“It’s just very different,” Bubb said of Experian. “There’s not a lot of synergies with Homebase, Argos and what Experian does.”
For the 12 months ended March 31, Experian’s sales grew 18%. Ongoing operations at Argos and Homebase grew by 3% during the same period.
GUS trades on the London Stock Exchange at near 14 times earnings, said Richard Ratner, an analyst at Seymour Pierce in London. Experian could trade at closer to 19 times earnings, he said.
“It’s a lovely company,” Ratner said of Experian, “with good management.”
Observers point to a precedent: GUS three years ago spun off Burberry Ltd. and still owns about 65% of the retailer.
Speculation grew this month when Experian said it was buying the operator of LowerMyBills.com for $330 million, plus another potential $50 million based on performance. The site helps consumers find deals on mortgages, auto loans and other expenses.
Many in the British press see the deal as a beefing up of Experian in the runup to a spinoff.
Experian’s Robert downplayed the connection.
“I don’t believe the growth strategy of Experian’s North American operations can be assumed to drive any aspect of the GUS review,” he said.
Analyst Ratner said he believes word on a spinoff is pending. He said he expects GUS to lay out a timeline for a split next week. A scenario could be for GUS to offer Experian shares to its existing shareholders and keep a stake in the business itself.
Bubb of Evolution Securities said he was unsure of a timeline but believed some kind of “demerger” was in the cards.
Another option could be an offering in which GUS publicly sells, say, 25% of Experian, Rudin said. Then GUS could sell more down the road, he said.
A third option could be to sell Experian to another company or private equity investors, Rudin said.
With a spinoff, analysts speculated that shareholders of GUS would get one share of Experian for every share of GUS they owned.
That kind of deal helps shareholders and the company mitigate taxes, said Chris Kramer, managing director of Strategic Equity Group in Santa Ana.
Experian is one of three major credit reporting companies along with Equifax and Marmon Group Inc.’s Trans Union LLC.
The company is the result of 1996’s combination of GUS’ CCN Group and TRW Information Systems & Services.
Experian has looked to move beyond credit reports. The company also offers marketing and fraud prevention services and automotive data.
The company has a new arm called Experian Interactive that targets consumers. It’s made four major acquisitions since 2002, including LowerMyBills.
“The acquisition of LowerMyBills.com was extremely important, as it represents the next logical step in the development of our direct-to-consumer family of businesses,” Robert said.
Despite its size, Experian has had a relatively low profile in OC. That stands to change for the company and Robert if Experian is spun off.
“Whether (Robert) wants it or not, being a CEO at a public company is going to make him just a much more watched face on the local scene,” Rudin said.
