New BHS owners, Retail Acquisitions headed up by Keith Smith, a former
director of small-to-mid capital broking house Nabarro Wells, has stated
that turning around the loss-making retailer is a “very big challenge”
while adding that the business has “significant potential”.

It was reported last week that the little-known consortium Retail
Acquisitions, bought the struggling retail chain for 1 pounds from Sir
Phillip Green, with the retailer’s debts written off by the Arcadia owner,
and now the company is setting out a rescue plan to turn around the
department store, starting with facing the retailer’s pension fund, which
has an estimated deficit of between 100 and 130 million pounds.

In an interview to The Sunday Telegraph, Smith said the pension fund is
the “biggest challenge” facing the retailer, but added that a “credible
plan” was in place to fund it, including a “mutually agreed” deal with
Green whereby they would both top up the pension fund with annual payments
over the next three years.

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The new owner is preparing to meet with the fund’s trustees and the
pensions regulator this week, where it will discuss its plans for financing
the deficit.

“From the trustees’ perspective we want to know the new owners’ plans
for the business, how they propose to turn it around and how they intend to
fund the business,” Chris Martin, chairman to the trustees of the BHS
pension fund, told the Guardian. “How they fund the business impacts on the
pension scheme.”

Another challenge will be to find a permanent boss for the retailer, as
managing director Richard Price announced last month that he planned to
join Tesco to run its clothing business. While Retail Acquisitions has
expressed that it will retain the existing management of BHS it has added
that a BHS chairman with “significant retail experience” is needed to
manage the business and to help change the image of the retailer.

Retail Acquisitions unveils long-term goals for BHS

“Basically we think it is a company that has significant potential,”
added Smith to The Sunday Telegraph. “There are problems, which is why the
deal looks the way it does. We think we have got enough working capital to
keep it going and keep it going over with a profit. But it will be at least
two years before we will see it coming back to profit.”

Retail Acquisitions, which was incorporated in November last year, is
made up of a collection of financiers, lawyers and accountants, including
director Stephen Charles Bourne, director Dominic Chappell, solicitor Mark
Tasker, solicitor Edward Parladorio, company director Lennart David
Henningson and Smith as chairman.

It was Chappell, a former racing driver that introduced the consortium
to Sir Phillip Green on acquiring BHS.

As well as getting the pension fund back on track and the appointment
of a new boss for the retailer, the investment group has also expressed a
long-term view on BHS with plans to invest heavily in revamping the
existing store portfolio and adding new concessions to help drive growth of
the business. They’ve also expressed an interest in exploring international
expansion opportunities, to build upon the 88 franchise stores it currently
has overseas in the Middle East, Malaysia and Russia.

At home BHS has 173 UK stores, of which 14 are dedicated home stores,
while fashion will still be a focus for the retailer, the new owner has
stated that they will be looking to grow its homewares business as well as
roll out further food trials that have currently been taking place in three
stores.

Commenting on the sale, Green said: “I am pleased that we have found a
buyer in Retail Acquisitions Ltd who wants to develop the BHS brand. Having
acquired the business nearly 15 years ago in May 2000, one of my clear
objectives in identifying a purchaser was ensuring their desire to take the
business forward.

“The business is handed over in a sound financial position with
significant cash balances and banking facilities in place. I am confident
that Retail Acquisitions Limited have a platform to grow the business and
return it to profitability.”

Image: BHS

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