By PAUL PANCKHURST
Pacific Retail Group is selling flagship retailers Bond & Bond and Noel Leeming, and will put much of the money into PowerHouse, the British retail chain that went bust last year.
Eight weeks after investment banker Steve Smith took over as acting chief executive, the Eric Watson-controlled PRG yesterday
announced plans to float the businesses on the stock exchange in late June.
The Business Herald predicted PRG's plans for asset sales 12 days ago.
The retail business group to be sold - Noel Leeming, Noel Leeming Furniture, Bond & Bond and Big Byte - employs 1200 staff in 90 shops.
The stores sell products including whiteware and home appliances.
The group is the most valuable of PRG's four main business units, and one estimate suggests the float could raise $130 million to $150 million.
An estimate from another source put the enterprise value at $150 million to $200 million.
That is more than PRG's market capitalisation, which was $126 million yesterday. Only 6 per cent of its shares are freely traded.
Smith said the company was talking to the organiser of the float, Goldman Sachs JBWere, about provisions for management to buy in.
Operating earnings for the unit for the financial year to March 31 are yet to be reported, but are expected to be between $18 million and $19 million. A lift is expected for this financial year.
The sale will leave PRG with three main units - consumer finance business Pacific Retail Finance, lingerie company Bendon, and PowerHouse, the specialist appliance retailer bought last year from its receivers.
Bendon and the finance business are worth $50 million to $100 million each; the value of PowerHouse is uncertain.
Smith said the proceeds of the float would be used for working capital for PowerHouse, the repayment of a $14 million loan from Pacific Retail Finance to PowerHouse, and cutting PRG bank debt, which was shown as $26.8 million at the half-year.
A "considerable" sum would be left over.
Asked how much capital PowerHouse would need, Smith said: "It's more likely to be tens of millions than millions.
"But I emphasise that it's entirely manageable."
PRG made its big bet on PowerHouse after dropping out of the bidding last year for retail chain Farmers.
The purchase price was $47.2 million, and PRG later loaned $19.7 million in one set of advances to the company.
PRG will be selling the businesses in a choppy sharemarket experiencing a flurry of floats after a relative drought since late 1999.
But Smith said: "We are not selling the business at any price - full stop."
PRG chairman Maurice Kidd explained the decision to sell the retail operation in terms of the company's newly articulated identity as an investment company.
"As an investment company, our core competency is to acquire developing businesses with great potential and add value to them."
Bendon and Pacific Retail Finance offered more growth potential than the retail business unit.
The float also excludes Living & Giving, a retail chain which has been a poor performer and contributes a tiny amount of PRG's revenue.
Yesterday's briefing on the float was part of PRG's efforts to open up.
Kidd said the company had been known as "non-communicative, secretive - I don't know what the words are".
London-based Watson's Cullen Investments holds 77 per cent of PRG, institutional investor AXA has 12 per cent and businessman Peter Francis holds 5 per cent.
The company's shares closed yesterday up 6c at $2.06.
Group assets
For sale: Noel Leeming, Bond & Bond, Noel Leeming Furniture, Big Byte
Not for sale: PowerHouse, Pacific Retail Finance, Bendon, Living & Giving
By PAUL PANCKHURST
Pacific Retail Group is selling flagship retailers Bond & Bond and Noel Leeming, and will put much of the money into PowerHouse, the British retail chain that went bust last year.
Eight weeks after investment banker Steve Smith took over as acting chief executive, the Eric Watson-controlled PRG yesterday
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