Private Equity Investment Company Quadrant announces plans to acquire Super A-Mart retailers.
Online PR News – 23-September-2012 – Sydney NSW – Quadrant To Buy Super A-Mart
Quadrant Private Equity has bailed out furniture retailer Super A-Mart and Barbeques Galore in a deal with owners Ironbridge Capital worth about $500 million.
The transaction, expected to be made public today, shows private equity is back in the market for beaten-up retailers when the sharemarket is heavily discounting listed peers because of weak consumer spending and online competition.
"Retail furniture is a bright spot. It's a $12 billion a year business with 5 per cent a year growth," Quadrant chief Chris Hadley told The Australian Financial Review.
"It's a category killer, a scale player and we expect revenue to grow to $1 billion a year within the five-year ownership period."
After tipping in $135 million, Quadrant will emerge with a 60 per cent equity stake in the two businesses, for an earnings before interest, tax, depreciation and amortisation multiple of about 6 times.
Super A-Mart is the largest discount furniture and bedding retailer in Queensland and northern NSW.
Ironbridge, which bought both businesses at high earnings multiples during boom times and is selling down at a loss, will retain a stake in both businesses.
Macquarie Group and Partners Group , co-investors under Ironbridge's tenure, also surface with equity and, together with Ironbridge, hold about 30 per cent. Management of the two companies, which stays unchanged with Eddie Macdonald heading up Super A-Mart and John Hardy in charge at Barbeques Galore – will own just under 10 per cent. Mr Hardy will manage the merged group.
Mr Hadley said Quadrant planned to boost profitability by reducing debt and rolling out more stores. The deal has reduced gearing levels to less than three times EBITDA. Seven banks have provided about $250 million of debt on five-year terms.
Last year, Super A-Mart reported EBITDA of $37.1 million, down from $40.5 million in 2010.
It is expected to deliver EBITDA of about $40 million in 2012.
Ironbridge, which was advised by Macquarie Capital , was under pressure from its lenders to finalise a deal.
About $150 million of senior loans were due to mature in December and a further $135 million of mezzanine debt was due to expire in June 2013.
Greg Ruddock, Ironbridge co-chief executive, said: "We are very pleased to partner up with Quadrant to continue to develop these two great retailers with a balance sheet that better supports our growth plans."
Quadrant is upbeat about the growth prospects for Super A-Mart.
"The business has a whole new set of options – we will be rolling out 30 new stores, 6000 square metres each, over this five-year period," Mr Hadley said. He added that there was potential for further consolidation in the sector, noting that in some states independent furniture retailers accounted for about 70 per cent of the market.
While most of the listed retailers have had their share prices slump, Super A-Mart's closest listed comparable, Fantastic Holdings, has been one of the market's stronger performers.
Fantastic shares have risen more than 20 per cent this year, and it trades on a forward price to earnings multiple of about 11.6 times, according to Bloomberg.
Super A-Mart has estimated about 60 per cent of its sales are from new home owners and 40 per cent are from existing owners. Despite some high profile successes in the retail space for private equity– notably TPG's sale of Myer – there have also been a number of failures due to weak earnings and debt-laden investments.
Company Name : Quadrant Private Equity
Complete Address : 126 Phillip Street, Sydney NSW 2000
Phone: 61 2 9221 3044