PRG borrows to buy Bendon

By Deborah Hill Cone

Thursday 28th March 2002

Peter Halkett

Listed retailer Pacific Retail Group said yesterday it would fund its purchase of lingerie marketer Bendon through bank debt.

With a "lazy" balance sheet, it will be able to manage it comfortably, analysts say.

According to PRG's 2001 annual report the $123 million company had borrowings of just $527,000 and an equity ratio of 47.4%.

PRG this week triumphed in its bid to buy Bendon after institutional shareholder AMP Henderson Global Investors decided to sell its stake.

A rival bid by Bendon managing director Hugo Venter, backed by AMP's investment banking arm, failed.

PRG managing director Peter Halkett said the total cost of the acquisition was about $60 million, but factoring in the cash held within Bendon left a balance of about $40 million.

It had paid $12-13 million to acquire shareholdings already, and the balance would be funded by cash and bank debt, Mr Halkett said.

With the financial side of the transaction covered PRG will be dealing with the somewhat complex relationships with management and customers.

Mr Halkett said PRG bought the company including its management, so he expected the team to stay on and praised Mr Venter as a key to Bendon's success so far.

Another issue is the relationship with key Bendon customer Farmers, which competes with PRG in whiteware and is run by ex-PRG managing director Nick Lowe, who left following a furore over his million-dollar salary.

But Mr Halkett said he had a "solid" relationship with Mr Lowe and he was sure they could talk to overcome "any issues which may or may not exist."

Mr Halkett said he was disappointed the success of the Bendon acquisition had not been reflected in the PRG share price.

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