B&M European shares fall as Arora family sells major stake

B&M European Value Retail chief executive Simon Arora's family investment vehicle and a private equity backer have together offloaded £454.3m worth of shares in the discount chain.

CD&R, a fund of private equity group Clayton, Dubilier & Rice that is advised by B&M's ex-Tesco chairman Sir Terry Leahy, and SSA Investments, the Arora family vehicle, together sold 125m shares in B&M at a price of 363.4p apiece.

The sale, which Citigroup confirmed the sale on Friday morning, representing about 12.5% of the shares in issue, leaving the Arora family with a 15% stake and CD&R with 4.9%.

Shares in the FTSE 250 group, which recently reached a new all-time high above 370p, were down almost 3% to 359.8p after the first hour of trading on Friday.

Arora, who with his brother Bobby acquired what was a 21-store chain from founder Malcolm Billington in 2004, were said to "remain fully committed to the business and are confident in the outlook for B&M both in the UK and internationally", according to a company statement.

"SSA Investments' participation in the transaction will provide further liquidity in B&M, and the proceeds from the sale will be used to diversify the Arora's investment portfolio. SSA Investments remains B&M's largest shareholder and is committed to participating in B&M's exciting future growth prospects”

Last week the general merchandise discounter reported preliminary results showing group revenues increasing 19.4% to £2.43bn, like-for-like sales up 3.1% and adjusted profit before tax up 25.6% at £190.1m.

After opening 53 new stores in the UK and 19 in Germany, B&M reported a strong pipeline of between 40 and 50 new stores planned in the UK and a further 15 in Germany in the current financial year and upped its UK store target to at least 950 stores, from 850.

Arora said B&M had “never” been in better shape, with a "powerful return to trading form; building greater stability and consistency into our operations, keeping our costs down, delivering an even more competitive, compelling offering across our ranges week-in, week-out, especially in our seasonal peak periods and importantly, helping our customers spend less at a time when general retail prices have started to rise".

Analysts and investors were impressed. Jefferies, for example, praised control over gross margin and costs and raised its 2018 profit forecasts 5% and said B&M has a strong balance sheet to fund either M&A or capital returns and so upped its price target to 415p.