Pret’s appetising refinancing deal

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The private equity firm behind Pret a Manger could be in line for a £300m payout after shelving IPO plans in favour of a refinancing deal.

The potential refinancing follows better than expected earnings for 2012 of £60m, along with a successful store expansion programme that has outpaced both US and Asian rivals.

Bridgepoint, which owns the sandwich chain, has launched a “beauty parade” for banks after months of speculation that the company might be gearing up for a public market listing.

However, insiders now say Bridgepoint will extend its ownership for a few more years, while possibly paying itself a dividend and raising cash for more expansion.

Although no final board decision has been taken, it is likely that the company will look to raise a sum equivalent to between three and six times its earnings, which could be as much as £360m.

“This is a great British success story, it is making great progress in the US, it is motoring in Asia and has had a fantastic start in France,” said William Jackson, chairman of Pret a Manger and managing partner of Bridgepoint.

“In a pretty tricky retail environment, Pret has done very well. But it has done that by sticking to detail and keeping to its core values.”

Clive Schlee, Pret a Manger’s chief executive, said the sandwich chain was “a special company” that has been nimble enough to make the best of a difficult high street environment.

“We have also been a beneficiary of the declining UK high street,” said Mr Schlee.

“The way we have expanded, and the size of the shop spaces we have been able to rent could never have happened five years ago.”

Mr Schlee said the dramatic changes in UK high streets have opened the doors to up to 70pc reductions in rental contracts, allowing the sandwich store to take shops as big as 3000 square feet.

“The problems of the high street are well rehearsed. But there are opportunities out there. But you need to provide an experience for the consumer,” he said.

“Luckily no one is selling sandwiches on the internet.”

Pret was founded by university friends, Sinclair Beecham and Julian Metcalf, in 1986. They wanted to sell fresh sandwiches to a booming new breed of food fans yearning for more than a limp ham sandwich and a Kit-Kat for lunch.

Pret and similar chains have shifted British lunchtime eating habits and introduced hot Swedish meat ball sandwiches to the everyday culinary lexicon.

Over the years the two founders have courted controversy, first when they sold a stake to McDonald’s and then when they sold a 15pc stake to Goldman Sachs (NYSE: GS-PB - news) . Since then, McDonald’s and Goldman have sold out, with management and the founders holding a 30pc stake and Bridgepoint the remainder.

Mr Schlee said the ethical focus of the company was part of its success.

“The fact that we give all the food left over to the homeless at the end of the day re-enforces the fact that we serve food that is always fresh and made on site, on that day,” he said.

Unlike British rivals in food and retail which have failed to break the US and Asian markets, Pret has managed to find a formula that translates to markets outside the UK.

“You have to tweak the model when you go abroad,” said Mr Schlee, explaining that Americans need 80g portions of ham not 50g, self-serve coffee, and generally more protein in everything. In France, consumers want a bigger dessert range, with most customers picking up a pudding as well as a sandwich.

In Asia, there are more hot food options and meal deals.

In the UK, Pret has not only expanded the size of its shops but also stretched its opening hours and focused on creating a bustling breakfast trade.

It is expanding in the regions, to places such as Leicester and Tunbridge Wells. In three years’ time Mr Schlee says he wants New York to be like London and Pret to have a presence in all the main US cities. After Paris, the “Pretometer” is pointing to openings in Berlin, Madrid and Barcelona.