Anchorage fully exits Dick Smith Electronics with 4x return

Having reduced its stake in Dick Smith from 98% to 20% through the company's IPO in December 2013, Anchorage completed its exit on September 16, according to a regulatory filing. The private equity firm sold approximately 47.3 million shares at A$2.22 apiece to raise A$105 million ($94.4 million).

Anchorage's total proceeds from the investment now stand at an estimated A$449.5 million.

The private equity firm bought Dick Smith from supermarket chain Woolworths in September 2012 for an initial A$20 million plus a share of any upside resulting from the private equity firm exiting the asset. Ahead of the IPO, Woolworths accepted a A$74 million payment in return for part of its rights to the float proceeds. The company received A$24 million through the IPO.

At the time of the acquisition, Dick Smith was experiencing declining profitability. Working with CEO Nick Abboud, who took a 2% stake in the business, Anchorage implemented a turnaround program that involved hiring new management talent, revising pricing and brand positioning, altering product sourcing processes and reducing costs, and introducing better training and incentives for staff.

Net profit had slipped from A$13.2 million in 2012 to A$6.7 million in 2013, with EBITDA falling from A$32.6 million to A$23.4 million, and sales falling from A$1.37 billion to A$1.28 billion. In 2014, net profit rebounded to A$42.1 million, with EBITDA reaching A$74.4 million and sales coming to A$1.22 billion.

The store network expanded to 377 outlets across Australia and New Zealand under the Dick Smith, David Jones Electronics and Move brands. Over the course of 2014, the company opened a net 21 Dick Smith stores, four Move stores and commenced management of the electronics department of 29 David Jones outlets.

Dick Smith went public with a market valuation of A$520.3 million. A total of 156.6 million shares were sold at A$2.20 apiece, generating proceeds of A$344.5 million for Anchorage. Incentives structured into the offering also saw Abboud's pre-IPO stake convert into a 6.5% post-IPO holding, while other management shareholders ended up with 5%.

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• Topics
• Exits
• Consumer
• Australasia
• Australia
• Anchorage Capital Partners
• New Zealand
• Consumer
• Exit
• Sell down