Australia's PE-backed Best & Less receives take-private offer

BBRC International has teamed up with Ray Itaoui, who has a similar industry background, on a bid of AUD 1.89 per share, according to the filing. This gives Best & Less a market capitalisation of around AUD 237m (USD 157m). The stock closed flat at AUD 1.95 on May 1. It has fallen 37% over the past 12 months and is trading at a roughly 15% discount to the IPO price.

Best & Less raised AUD 60m in its offering in July 2021 with BBRC investing an additional AUD 40m. Allegro realised AUD 91.3m through the two transactions. The private equity firm made another partial exit of AUD 29.7m in September 2022 via a block trade.

Should the BBRC-Itaoui bid proceed, Allegro would fully exit its remaining 32.43% interest. The private equity firm has indicated it will vote in favour of the offer; so has an investment vehicle controlled by Jason Murray, Best & Less’ executive chairman, who owns 8.27%. BBRC already holds a 16.45% interest, and it has set a minimum acceptance threshold of 55%.

Allegro acquired Best & Less in late 2019 as part of a portfolio of brands owned by Greenlit Brands. Steinhoff International, Greenlit’s South Africa-based parent was keen to fill a hole in its balance sheet by divesting assets, and the Australia portfolio was already underperforming.

“Top line and profitability were declining, the balance sheet was bloated, and the parent was a motivated seller. At the time, retail was also on its nose and very few people were interested in that kind of business,” Fay Bou, a partner at Allegro, told AVCJ in late 2021.

The other brands in the portfolio were restructured and sold off, allowing Allegro to focus on Best & Less. Key initiatives included improving governance, balance sheet optimisation, building out omnichannel capabilities, digitalising front and back-office operations, and implementing a growth strategy that emphasised the value segment with baby and kids as the core category.

COVID-19 impeded progress, with every store across Australia and New Zealand impacted by lockdowns. For a time, Best & Less was running at zero revenue and 100% cost. Meanwhile, online sales penetration rose from 3% to 10% during an initial six-month period of uncertainty. It laid the ground for a rapid turnaround, with EBITDA tripling within the first 20 months of ownership.

The company now has 248 physical stores and operates under the Best & Less and Postie brands in Australia and New Zealand, respectively. Revenue for the 12 months ended June 2022 was AUD 662.2m, down from AUD 663.1m a year earlier. EBITDA fell from AUD 71.6m to AUD 62.5m and net profit slipped from AUD 47m to AUD 41.1m.

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• Topics
• Australasia
• Consumer
• Buyouts
• Trade sale
• Australia
• Allegro Funds