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PRG or MBO for Farmers?

By Christine Nikiel

Friday 4th July 2003

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The frontrunner to buy department store chain Farmers, Pacific Retail Group, would not comment yesterday on speculation it was out of the race.

And while some analysts said $130 million company PRG would have difficulty raising twice that to fund the deal, a source suggested PRG had "help" to finance its bid.

The source questioned whether the rumour PRG was pulling out was a smokescreen. "With a deadline looming, wouldn't you want other bidders to think you had pulled out so they would lower their offers?" he said.

Monday is the deadline for final bids.

PRG, 73% owned by Eric Watson, has been a frontrunner in the race to buy the 64-store Farmers retail chain and its $300 million finance company.

Another possible scenario is a Farmers' management buyout, expected to be led by Farmers chief executive and former PRG head, Nick Lowe, and backed by a merchant bank or Fisher & Paykel Appliances, one of Farmers' biggest whiteware suppliers.

Grant Samuel's GS Private Equity is understood to still be in the game ­ looking at a joint venture with a partner ­ and Australian fund Castle Harlan Australian Mezzanine Partners (Champ) Group has also been said to be a contender.

PRG, which has a market capitalisation of $130 million, is said to have put in an out-of-the-blue offer of $260 million for Farmers last year ­ before the formal sale process ­ which was turned down.

ABN Amro, the broker handling the sale, said it hoped for an announcement on the sale before the end of this month.

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond

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