Harvey Norman and Specialty Fashion top targets for PE – Citi

Analysts at the financial conglomerate told the Wall Street Journal that their potential IRRs make them appealing to investors.

Harvey Norman is a retailer of electrical, computer, furniture, entertainment and bedding goods, while Specialty Fashion operates chains such as La Senza, Millers and Katies.

Other Australian retailers have generated interested among PE firms this year, namely Pacific Brands, which has been courting KKR, and surfwear company Billabong, which received offers from TPG Capital.

"In retail, we see three areas of interest for private equity: margin recovery stories; under-valued asset plays; and cash flow generators," explained Citi's Craig Woolford. "Billabong and Specialty Fashion are the two companies with scope for margin recovery. Asset plays are typically made around property holdings, with most significance for David Jones and Harvey Norman."

Billabong recently rejected TPG's A$841 million ($904 million) offer but said it was willing to engage with any party that make an attractive proposal. This appears to have led the Blackstone Group and KKR to consider making bids of their own.

Billabong is seen as attractive because its share price has fallen 65% in the last 12 months. It currently stands at A$2.74.

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• Topics
• Consumer
• Australasia
• Buyouts
• TPG Capital
• KKR
• The Blackstone Group
• Australia
• Consumer