The scandal engulfing fashion chain Primark could accelerate a spin-off from its parent group Associated British Foods (ABF), sources close to the firm have told The Mail on Sunday.
Speculation that the retailer, seen as the jewel in the crown of the ABF empire, could be floated off as a separate entity, was reignited by last week’s resignation of boss Paul Marchant.
His exit came after allegations of inappropriate behaviour towards a woman in a social environment late last year that sparked an internal investigation by ABF carried out by lawyers at Herbert Smith Freehills.
According to analysts a price tag of £10 billion could be hung on Primark. The value of the whole group is £14 billion.
Primark’s profits have raced ahead, but ABF’s market value has tumbled in the past decade.
George Weston, ABF’s chief executive, has hinted in the past that spinning off Primark had been considered, but was dismissed as it was more desirable for Marchant to concentrate on running the retailer, rather than dealing with investors.
Shock exit: Former Primark boss Paul Marchant with model Emily Ratajkowski
‘We do look at spinning off the business from time to time,’ Weston said in 2022. But there was ‘real value’ in the group’s structure, where the Primark chief does not have a board seat.
It means the Primark team can ‘concentrate on retailing, rather than having to worry too much about investor relations’.
An expert close to the firm said of a break-up: ‘It could be a value unlock for the group as a whole.’
‘Primark’s potential is definitely undervalued by the market,’ an investor told the MoS. ‘A spin-off would certainly help. These decisions should constantly be evaluated.’
A spin-off would put Primark in line with rivals such as Next and Stockholm-listed H&M, each worth about £14 billion.
Finance director Eoin Tonge is now interim chief executive. His appointment is seen to reflect a new emphasis ‘on the numbers’ ahead of a possible flotation.
The Weston family, a billionaire business dynasty established in Canada in the 1880s, control 56 per cent of ABF through their personal Wittington Investments vehicle.
In 2021, they sold off the Selfridges department store chain, but they still own the iconic Fortnum & Mason luxury emporium.
ABF, which has its roots as a bakery, is one of Europe’s largest food processors, with Twinings and Silver Spoon as brands.
Marchant, who lives in the upmarket Dalkey area of Dublin, has a stake in ABF worth £7 million. It is unclear whether he will hand back any pay.
Potential replacements include former M&S clothing bosses Katie Bickerstaffe and Richard Price, as well as Lord Wolfson’s former number two and Reiss boss Christos Angelides.
Primark’s group strategy director Matt Houston and Liz Evans, Asda’s chief commercial officer who has turned around its George clothing range, have also been touted.
‘They need to get someone in for the longer term who will repair the brand damage,’ retail analyst Jonathan De Mello said.
Primark accounts for half of ABF’s £20 billion of annual sales. The chain, which has 450 shops in 17 countries, was founded in Ireland in 1969 by Arthur Ryan.
Marchant was only its second chief executive, having taken over in 2009 from Ryan.
In the 1990s, Ryan pioneered the move into low-cost clothing for younger women, supplying budget catwalk looks that led to the firm being dubbed ‘Primani’. But the company has struggled in recent years as lower-income consumers have been hard hit by rising living costs.
Shares in ABF have fallen 30 per cent over the past year.
It has faced competition from online rivals Shein and Temu, who offer bargain prices but do not have to pay the same level of tax as bricks-and-mortar shops.
Physical retail is Primark’s major focus and it has only just begun to roll out click-and-collect services.
An ABF spokesperson said: ‘The change of chief executive at Primark was unrelated to the group structure.
‘Primark is successful because of ABF, not despite it.’
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