PRG's sale plan nears finish line

Eric Watson's Pacific Retail Group is close to agreeing on the sale of its consumer finance arm, Pacific Retail Finance.

PRG has selected a preferred bidder and expects to make an announcement early next month.

The identity of the bidder and the offer price remain under wraps while due diligence is carried out, although some are betting the buyer will be the finance arm of US giant General Electric Corp.

Hanover, a finance company in which Watson has a 50 per cent stake, had run a rule over the the business. But yesterday it said it was not in the running.

PRG is selling Pacific Retail Finance because it needs cash to prop up its money-hungry British electrical goods chain PowerHouse. Its other major investment, lingerie-maker Bendon, also needs money to grow.

In June, PRG shelved plans to float the finance business - comprising Pacific Retail Finance, Pacific Retail Services, Montreal Financial Services and new addition Simply Insurance, acquired in April.

It cited fears about investors' appetite for new issues in a weakening sharemarket. But the sharemarket has since recovered, with the benchmark top 50 index touching an all-time high of 3407.27 on August 23.

Watson, who owns 81.3 per cent of PRG, had hoped to keep a majority shareholding in the finance operation via a sharemarket float. But in March, PRG adviser Macquarie told the firm it would only get full value if it sold the business outright.

PRG said yesterday that PowerHouse, the British chain that it bought from the receivers in 2003 for $47 million, was on track to break even by 2007. Turning the business around has been a more difficult task than originally thought, and the chain reported a March year loss of $51.4 million.

The past year had been about redefining PRG's focus on investments in the consumer sector. Its portfolio also includes the Living & Giving retail chain.

In the current year, it sold its appliance and furniture division, which included Noel Leeming, Bond and Bond, Big Byte and Noel Leeming Furniture stores, for $138.5 million.

Reflecting this change of focus, PRG yesterday disclosed a management shakeup. Acting chief executive Steve Smith steps aside and retires from the board, but will remain as a consultant until PRG has completed the finance sale.

Smith is replaced by Bendon chief executive Stefan Preston and Bruce Gordon, a former general manager of New Zealand operations for The Warehouse.

Gordon, who has been contracted in an executive capacity to PRG since February and was appointed as a director to the PRG board at the beginning of August, will be based in Britain to oversee the PowerHouse chain. Preston will remain in New Zealand.

Meanwhile, PRG chairman Maurice Kidd stepped down yesterday. He is replaced by Jock Irvine, chairman of property investment group Blue Chip.

Irvine said: "The board had considered appointing a new chief executive, however the opportunity to have a dual executive director presence across these main markets and bring an international perspective to our portfolio management proved to be more compelling."

Pacific Retail's shares were yesterday unchanged at $1.92, well off a year high of $2.31.