Smith City agrees to buy Furniture City for $5.85M for Auckland foothold

Tuesday 19th January 2016

Smiths City, the Christchurch-based retailer which is rejigging its assets to improve earnings, has agreed to buy retailer Furniture City, giving it a foothold in the Auckland market.

The company's trading arm Smiths City (Southern) agreed to buy the business and assets of Auckland-based Panmure Furniture City 1983 and its logistics operation Lucky Dragon for $5.85 million, which includes two stores in Auckland, one in Whangarei, an internet store and a distribution facility, it said in a statement. That adds to its current footprint of 33 stores, which spread as far north as the Bay of Plenty.

Under Smith City's new chief executive Roy Campbell, who took over from Rick Hellings last year, a 30-year veteran of the company, the retailer is running the rule over its assets in a bid to improve earnings. It's signalled that previous acquisitions, such as appliance chains LV Martin and Powerstore, won't be retained if they're not profitable. The purchase of Furniture City gives it an existing retail footprint and marks a long-held ambition to gain a presence in New Zealand's largest city and become a national retailer.

"We have been in need of an Auckland presence for some time," Campbell said. "With the acquisition by Smiths City of Furniture City we become a true national retailer in New Zealand. There's great synergies between the two companies and it's a logical move."

Smiths City is consolidating its stores to its one brand and is likely to bring Furniture City into the fold in the future, he said. The company is currently researching the level of consumer demand for Smiths City products and the possibility of Furniture City's range being expanded will be decided at a future date, he said.

Campbell didn't detail the company's future plans for expansion.

"We are always interested in expanding the retail footprint of Smiths City whether that's in Auckland or the greater New Zealand geographic footprint, relative to the viability and the market size that we seek," he said. "I think it's reasonable to assume that we would like to continue our growth plans so we'll see what opportunities are presented to us."

The acquisition would likely be funded by a mixture of debt and equity and is conditional on due diligence and finance being confirmed by Feb. 29, with settlement expected on April 1.

Furniture City is jointly owned by chief executive Roger Butcher and Jan Baker, according to Companies Office records.

Smiths City shares last traded at 54 cents, and have dropped 3.6 percent the past 12 months.

BusinessDesk.co.nz

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