Smiths City Group Ltd said on Monday it had entered a conditional agreement to sell its retail & finance operations in a transaction that valued the assets at about $60 million.
Directors will issue an update this Friday.
Wednesday evening, and Smiths City’s board clarified sale requirements, saying it was conditional on:
- Buyer finance being confirmed
- Smiths City shareholder approval, and
- Smiths City financier approval.
Smiths City Chair Alastair Kerr said 7 of the company’s 29 stores would close as a result of its strategic review.
“The final number of stores to be sold is dependent on the lease transfers & new lease terms being agreed for those transferring stores,” he said.
The buyer is Polar Capital Ltd, owned by Colin Neal of Auckland, founder of the refrigerated logistics company Big Chill Distribution Ltd. Mr Neal & his partners registered their sale of Big Chill to Freightways Express Ltd on 1 April.
Mr Neal’s other interests include a 17% shareholding in Moa Group Ltd, owner of the Moa brewing business, and a number of food-related businesses such as South Island Fresh Foods Ltd & Lean Artisan Smokehouse Co Ltd.
No value left for shareholders
In addition to acquiring the stores, Polar Capital has committed to taking over certain other liabilities, including commitments Smiths City has made to customers who have paid deposits for goods or are awaiting delivery.
Mr Kerr said the agreement also envisaged offers of employment being made to about 75% of Smiths City’s 465 staff.
While he said the sale gave the Smiths City business a strong foundation to build on, directors believed Smiths City’s ordinary shares would retain no value following the sale.
Polar Capital would assume some debt & other liabilities, but the net amount expected to be received by current shareholders is $8 million.
In March, Smiths City anticipated its net loss for the year to 30 April would exceed the $1.9 million loss in 2019.
Smith City’s share price slid from 31c at the end of June last year to 24c in February, then tumbled to 10c on 30 March, recovering to 14.9c on 22 April. The shares closed at 14c last Friday. Trading in them has been suspended this week.
Mr Kerr said conditions of the agreement included Polar Capital securing finance.
Struck down by pandemic
The death knell for Smiths City was the Covid-19 pandemic, during which its stores were closed.
Mr Kerr said: “As we signalled at the end of March & earlier this month, the Covid-19 pandemic has delivered a material & significant shock to the business. This shock has substantially shortened the time available for the turnaround programme that was the cornerstone of the company’s strategic plan. Faced with this shorter timeframe, it became clear that Smiths City needed to bring new capital into the business to drive the turnaround.
“In addition to taking steps to preserve cash and contain costs in the face of these new trading conditions, the board has explored numerous options to secure an injection of new capital. These efforts have included discussions with our existing largest shareholders & other potential strategic investors to underwrite a broader capital raising. We have been helped throughout this wide-ranging process by our advisors PwC.
“However, it has now become clear that the transaction we have announced today offers the greatest opportunity for Smiths City to endure for the long term. It also offers the greatest opportunity to protect the jobs of as many of our staff as we can in this uncertain time. We are hopeful that under new ownership Smiths City will prosper.”
Mr Neal said: “Smiths City has been part of the New Zealand retail landscape for more than 100 years. It is a trusted brand that has been synonymous with providing great quality, excellent value & attentive no-nonsense service.”
He reiterated his commitment that all Smiths City’s customer commitments would be honoured.
“If a customer has paid Smiths City for a product, they will get the product. I am looking forward to working with the Smiths City team to build on this proud legacy. I am also grateful for the resilience & continuing loyalty they & the broader community of partners have shown as we worked through this period of uncertainty.”
Attribution: Company release, Companies Office.