Myer To Be Sold Back: Example of What's To Come On U.S. Exchanges

Discussion in 'Wall St. News' started by ByLoSellHi, Apr 1, 2007.

  1. This is a great example of what I believe will happen to a great many of the companies private equity has been accumulating over the past 5 years, and especially, last 2 years.

    They will wait to the time is right of course, when the top of any given sector is near or in, but you will see many companies spun back onto the open markets.

    This, of course, will happen after massive amounts of debt have been added to these companies balance sheets. But it won't matter, because the principals of the private equity firms would already have gotten their pound of flesh and then some:

    Myer May Be Sold Back in About 2 Years, Chairman Says (Update1)

    By Angela Macdonald-Smith

    April 1 (Bloomberg) --
    Myer Pty., Australia's biggest department store chain, may be sold back to the public in a little more than two years as more stores open, sales gain and costs are reduced, said Executive Chairman Bill Wavish.

    Texas Pacific Group's Asian buyout fund, which bought Myer in June for A$1.4 billion ($1.1 billion), had expected to sell it back to the public within three to five years, Wavish said today on Australian Broadcasting Corp.'s Inside Business program. The timing may end up closer to three years, he said.

    Melbourne-based Myer, which is due to open five new stores in 2007, said March 27 first-half earnings before interest and tax surged 84 percent as Texas Pacific cut costs and boosted sales of more profitable clothing brands. Texas Pacific's fund Newbridge Capital LLC targets poorly performing Asian assets with the aim of improving results before selling them for a profit.

    ``Myer is a quality asset, and in the time they've had it they seem to have made as good progress as anyone would have expected,'' said Grant Saligari, a retail analyst at Commonwealth Securities Ltd. in Sydney. ``Still, if you look at some of the longer-term initiatives they're taking, like their store expansion program, you wonder how proven that will be coming back onto the market in a couple of years.''

    Newbridge Capital joined with members of the Myer family to buy the 61-store Myer chain from Coles Myer Ltd. Newbridge owns 88.2 percent of Myer, while the descendants of Sidney and Elcon Myer, who founded the firm in 1900, own 8.5 percent and management control the remaining 3.3 percent.

    Sales Target

    Myer plans to open a further 12 outlets after this year as it targets annual sales of A$4 billion.

    ``We originally talked about three to five years away,'' Wavish said today of the probable timing of the sale. ``We are almost a year into that now. I think it will probably be at the short end of that three-to-five year period if the progress continues as it is.''

    The company has ``a hundred'' programs underway to improve business performance, which are 40 percent complete, though some will take longer than others, Wavish said. A new stores program will result in sales growing in the ``high single digits,'' while the number of outlets in the Myer chain will increase to 75, he said.

    Investors who buy shares in Myer when it's sold back to the public should benefit from future gains expected from the profit improvement programs, Wavish said.

    ``I think at the point that we go public we might have completed the things that we have to do to improve the business but the benefits won't have all flowed through,'' Wavish said. ``There will still be plenty left for people in due course.''

    The owners would still need to convince investors that improved margins are sustainable for a sale to succeed in the shorter timeframe, Commonwealth's Saligari said. ``They're making a lot of changes, so whether they can be convincing enough in two years' time we'll just have to wait and see,'' he said.
  2. Chagi


    Good point - private equity may be buying up quite a few companies right now, but eventually they will need/want to sell some of their investments.