DEALWATCH:Comet Buyer Pool Shrinks As Kesa Adamant Buyer Keeps Chain
30 July 2011 - 12:02AM
Dow Jones News
Kesa Electricals PLC (KESA.LN) won't consider selling its
struggling U.K. electricals chain Comet to anyone who would place
it into administration, shrinking the pool of potential acquirers
that likely includes several specialist liquidators.
The company last month said it is considering all options,
including a sale of the embattled business, which lost EUR10
million in fiscal 2011, but a person close to the company said
Friday Kesa will not consider a sale unless the new owner plans to
run the retail chain as a going concern.
That means that several restructuring specialists that have
reportedly expressed interest, such as GA Europe, Hilco and Gordon
Brothers, are likely to be out of the running given their precedent
in liquidations.
That leaves private equity group OpCapita as a strong contender
for the chain. Gordon Brothers is working with OpCapita in an
advisory capacity looking at Comet's inventory to allow OpCapita to
raise sufficient working capital to run the business, a person
familiar with the situation told Dow Jones Newswires.
OpCapita's investment remit is to reorganize failing businesses
and it counts David Hamid, a former Dixons Retail PLC (DXNS.LN)
board member and ex Halfords PLC (HFD.LN) chief executive among its
operating board.
It also has acquisition history with Kesa, as it was part of a
consortium that bought French furniture and electricals retailer
BUT from the company for EUR550 million in 2008.
But it could face competition in the form of John Weight, a
former Kingfisher PLC (KGF.LN) executive and the head of turnaround
company Weight Partners, who is also reported to have made an offer
for the company. Weight Partners declined to comment.
A spokesman for GA Europe declined to comment at such an early
stage of the sale process but pointed out that restructuring is the
company's strong point. Gordon Brothers was not available for
comment and Hilco declined to comment.
Trade buyers for Comet are few and far between. Larger rival
Dixons is already downsizing its store portfolio and would be
unlikely to get Competition Commission clearance for a buy, while
U.S. firm Best Buy Co Inc. (BBY), is in the business of much larger
stores and therefore an unlikely bidder according to one retail
analyst.
The clock is ticking on a sale of Comet after Kesa's largest
shareholder, activist investor Knight Vinke which holds 19.3% of
the group, wrote an open letter to the company earlier this month
saying that Kesa must resolve the situation by its Annual General
Meeting in September and it must get an acceptable price. First
round bids were due last week according to a person close to the
company.
Analysts are broadly agreed that Kesa would have to pay someone
to take the company off its hands, but the size of any working
capital 'dowry' is not clear, with one London-based analyst
estimating a figure of at least GBP50 million.
If a sale can't be made, Kesa said it will hold onto Comet and
turn it around by slimming down and overhauling its 250-store
portfolio, and cutting costs while refocusing on service in the
hope of returning to profit.
By Kathy Gordon, Dow Jones Newswires; 44-207-842-9293;
kathy.gordon@dowjones.com
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