Australia’s Gresham PE in $180m Witchery Group exit
Gresham Private Equity has agreed to sell fashion retailer Witchery Group to Country Road for A$172 million ($180.2 million). The deal will see Witchery CEO Ian Nairn replace Howard Goldberg as head of Country Road, which is majority-owned by South Africa’s Woolworths Holdings.
Gresham has held the asset for six years, having originally paid an estimated A$130 million for it via Gresham Private Equity Fund 2, a A$325 million vehicle that closed in 2005. Witchery is a 40-year-old brand offering apparel and accessories for men, women and children. One year after buying the brand, Gresham completed the bolt-on acquisition of Mimco, a leading Australian fashion accessories designer.
Witchery currently operates 197 stores and concessions in Australia and New Zealand, plus 13 in South Africa and Singapore. Mimco has 96 outlets in Australia, New Zealand and Singapore. For the 2011 fiscal year, the Witchery Group generated around A$266 million in revenue and normalized EBITDA of A$34 million.
Country Road will finance the purchase through a rights issue and a five-year senior bank facility, each worth A$92 million. Under the rights issue, shareholders will be invited to buy one new share for every two existing shares at an offer price of A$2.66, a 19% discount to Country Road's closing price Tuesday. Woolworths, which owns 88% of Country Road, will participate in its pro rata share of the entitlement, providing approximately A$81 million.
"The acquisition of Witchery Group creates one of Australia's largest specialty fashion retailers with complementary brands and a strong position in the mid to upper tier specialist retail sector," said Ian Moir, chairman of Country Road. "The acquisition delivers an attractive portfolio of owned brands, greater scale, diversified revenue streams and industry leading margins."
Based on 2011 data, the combined entity will have 517 stores and revenues of A$679 million and EBITDA of A$73 million. Country Road expects the merger to deliver cost synergies of A$10 million on an annualized basis over a period of four years, with one-off integration costs of A$7 million incurred over three years.
Country Road announced last month that sales for the 2012 fiscal year were on course to reach A$419 million, up 1.8% year-on-year.
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