Bond & Bond and Noel Leeming to be part of Pacific Retail float

9.45am

The Eric Watson-controlled Pacific Retail Group (PRG) said today it plans to float off its Noel Leeming, Bond & Bond, Noel Leeming Furniture and Big Byte retail brands in an Initial Public Offering (IPO).

Chairman Maurice Kidd said PRG had commenced preparation for an IPO for which shareholder approval would be sought in mid-to-late June.

"We hope to take the offer to the market in late June," he said.

The move comes following a review by the PRG board of the group's investments and capital funding requirements.

"As an investment company our core competency is to acquire developing businesses with great potential and add value to them," Mr Kidd said.

"The board review involved looking at the stage our various businesses are at in the development cycle, and considering alternatives available to increase capital funding and maximise shareholder value from our portfolio."

Proceeds of the sale would fund future investments, meet working capital requirements of PRG's UK unit, PowerHouse, and reduce debt including a $14 million loan advanced to PowerHouse by Pacific Retail Finance (PRF).

Mr Kidd said the PRG board had considered a variety of options.

Relative to the group's other investments, the board considered that the New Zealand retail business was the most developed in the PRG portfolio.

"The retail business is well suited to public ownership. It is highly profitable, with a combined turnover of half a billion dollars a year.

"Its ebita (earnings before interest, tax and amortisation) for the financial year just finished is expected to be in the range of $18-19 million."

Goldman Sachs JBWere would organise the IPO and listing of the company.

PRG acting chief executive Steve Smith, a former PricewaterhouseCoopers corporate finance and investment banking partner, said the management team of the new company would be led by John Milford, the current CEO of Pacific Retail Ltd.

Pacific Retail is one of the biggest retailers of household appliances, computers, technology and the number one seller in this country of the HP, Sony, Philips, Electrolux and Samsung brands.

Mr Smith said the name of the new company would be announced closer to the IPO.

Mr Kidd said that as an investment company, PRG wanted a portfolio of investments in various stages of the value cycle, in order to develop the assets and derive ongoing value-add for shareholders.

He cited Bendon as an example of its track record.

"PRG saw it had untapped potential when it bought Bendon in 2002. There has been substantial improvement in all aspects of Bendon's business since."

Under group ownership, Bendon's operating profits had more than doubled and sales had grown by some 25 per cent.

Mr Smith said the PRF consumer finance business would not be included in the proposed sale. It would remain the exclusive provider of hire purchase funding to the new retail company.

The poorly performing Living & Giving chain would not be included in the IPO. It was considered too small scale with no real synergies to the major appliances and technology retail brands.

Problems with Living and Giving were being "addressed separately".

Mr Smith said there was significant growth potential in PRF and Bendon.

"Bendon is now worth much more than the original acquisition price, and there are excellent growth prospects, particularly in international markets.

"PRF has also become a substantial business in its own right. PRF has significantly increased its assets, following successful moves into personal lending, third party hire purchase and commercial loans."

PRF's debenture book grew from $160 million to $268 million in the last financial year, he said.

Mr Smith said the PowerHouse acquisition also represented a major opportunity to deliver returns to shareholders following extensive restructuring since it was bought in September 2003 for $47.2 million.

"It is on track for a return to profitability under the leadership of former PRG CEO Peter Halkett.

"We are happy with progress to date... The trading performance is steadily improving. Our next milestone will be to achieve breakeven on an annual basis."

Further details of the revenue and earnings for all PRG businesses would be available when PRG Group published its result for the March 2004 year later this month.

PRG shares closed on $2.00 yesterday. They have fallen from $2.70 in late October and $3.10 in September 2002.

- NZPA