Permira, the private equity firm that owns iconic footwear brand Dr Martens, is strongly considering an IPO that could value the company at over £3 billion. On Monday, Dr Martens said its owner is planning to list it on the London Stock Exchange, through a premium listing that would be expected to see it become part of the mid-cap FTSE 250 index.
A £3 billion valuation would mean Dr Martens is one of the largest company in the FTSE 250, and graduation to the benchmark FTSE 100 would be in sight, if life as a public company starts promisingly.
The huge £3 billion plus valuation target Permira has for Dr Martens would represent a huge profit on the £300 million the private equity house paid the Griggs family for the bootmaker 7 years ago. The IPO, unless it is unexpectedly derailed, will also be the first big test of the City’s appetite for new listings in 2021.
The Dr Martens brand has long been associated with anti-establishment fashion and traces its beginnings to postwar Germany. The army doctor Klaus Märtens invented the boots’ trademark air-cushioned sole in an attempt to make military boots more comfortable after injuring himself skiing.
In 1960, the Northamptonshire-based Griggs family of shoemakers acquired the patent rights to the Dr Martens brand, and developed its classic 1460 eight-eyelet lace-up boot design. The boots first quickly become popular with police and postal workers, before being taken up as a wardrobe staple of the counter-culture punk and skinhead movements.
Dr Martens still trades on that rebellious image, though the now London-based brand has become a big business, selling over 11 million pairs of boots and shoes annually, across over 60 countries. To the end of the year that finished last March, Dr Martins made pre-tax profits of £101 million on revenues of £672.2 million.
Private equity owner Permina will use the planned flotation to start reducing its ownership stake in Dr Martens, realising a return on its original £300 million investment. Capital raised by the share sale will go to Permira, rather than being invested back into the business.
Dr Martens CEO Kenny Wilson yesterday commented:
“We’ve got more than enough money to fuel our growth. The business is highly cash-generative and we have all the cash we need to drive the investment that we want.”
The Covid-19 pandemic hasn’t hurt Dr Martens sales, with 5.5 million pairs of boots and shoes sold over the six months to the end of September. That represents almost 15% growth year-on-year for units sold. Growth in turnover was even better, up 18.4% to £318.2 million. A majority of revenue is generated through wholesale, but the brand also owns over 130 independent stores.
Mr Wilson believes that the company’s established brand on the British market offers it a platform for considerable international growth in North America, Europe, China and Japan, where it is less well known. After two years of strong sales growth, compound annual growth between 2018 and 2020 was an impressive 39%, Permira has decided the time is now right to take advantage by going public. He remarked:
“For many years the brand has been much bigger than the business, but over the last three years, in particular, we’re really been scaling the company.”
Permira plans to sell at least 25% of its equity in Dr Martins immediately through the IPO. However, that could rise if investor demand is strong.
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