Briscoe keeps mum on PRG retail asset talk

By Deborah Hill Cone

Friday 28th May 2004

Briscoe managing director Rod Duke will "neither confirm nor deny" speculation he is in negotiations to buy Pacific Retail Group's tagged-for-float retail assets.

A source within PRG said although Noel Leeming, Bond & Bond and Big Byte were publicly being prepared for an IPO, behind the scenes Duke was in talks to buy the assets in a trade sale.

He had "missed out on Whitcoulls" which sold to Pacific Equity Partners and was looking for a retail acquisition, the source said.

Duke told NBR he would neither confirm nor deny the speculation.

If it came off, the deal to buy the assets would be a big stretch for Briscoe Group, which has total assets of $111 million and a market cap of $273 million.

One of PRG's top three shareholders indicated last week he would expect the tagged-for-float assets to raise about $140 million.

Two weeks ago PRG announced it would flick off most of its stores as a separate listed retail package, allowing the company to focus on turning around its loss-making UK acquisition PowerHouse.

But a trade sale could be an easier route for PRG, if it found a buyer prepared to pay its price and perhaps, more importantly, to agree to keep channelling the stores' hire purchase agreements through Pacific Retail Finance.

A trade sale would allow the mainly Eric Watson-owned chain to escape the onerous and expensive IPO process, which will see its books picked over by analysts and investment bankers.

Since the IPO announcement on May 12, PRG's thinly-traded shares appreciated from $1.99 to $2.20 despite this week reporting a $22.6 million March-year loss.

Earnings before interest, tax, and amortisation (ebita) from the New Zealand group were up 32% to $44.3 million but newly-acquired British appliance retail chain PowerHouse lost $46.4 million at the ebita level in the seven months Pacific Retail has owned it.

Chairman Maurice Kidd said PowerHouse would continue losing money in the first half of this year but was expected to make a profit in the second half, although not large enough to offset the first-half loss.

Pacific Retail paid $48 million for Powerhouse last September and has since injected a further $33 million.

PowerHouse CEO Peter Halkett said management had already overcome the biggest of the risks involved in buying a company in receivership.

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