KKR's approach to Pacific Brands seen as opportunistic

KKR’s approach to struggling Australian clothing company Pacific Brands is seen as opportunistic, given the target’s weak earnings outlook, and some market watchers are predicting the US private equity firm will have to sharpen its pencil.

Pacific Brands stock surged 14 percent to 64 Australian cents on the ASX yesterday, the highest since October last year, after the Melbourne-based company said it was in preliminary talks with KKR that may lead to a takeover offer. The Australian Financial Review said a deal may value Pacific Brands at A$600 million.

“I think they are being opportunistic in their offer as earnings are at a low point” said Will Seddon, who helps manage A$350 million at White Funds Management in Sydney. “There’s a good chance they’re going to have to raise their bid”.

Shares of Pacific Brands have fallen 43 percent in the past 12 months as the company reported an annual net loss of A$131.9 million reflecting impairments and restructuring costs in what it called an “increasingly tough retail market.” Profit before items rose about 15 percent to A$103 million.

Seddon said KKR would have to prove it can revive the fortunes of the company whose brands include Jockey, Bonds and Berlei.

Pacific Brands has been owned by private equity firms before – CVC Asia Pacific and Catalyst Investment Managers took the company public in 2004, having acquired the business in 2001.

The company’s board and advisers Flagstaff Partners and Minter Ellison are “considering the approach and preliminary discussions are being held with KKR,” Pacific Brands said yesterday.

KKR wrote to the board of Pacific Brands before Christmas and there was no certainty a deal, worth about A$600 million, would proceed, the Australian Financial Review reported.

The company’s clothing and bed-linen brands include Berlei, Bonds, Clarks, Dunlop, Everlast, Grosby, Hard Yakka, Holeproof, Hush Puppies, King Gee, Mooks, Mossimo, Razzamatazz, Sheridan, Slazenger, Tontine and Volley.

The newspaper said Pacific Brands, a clothing wholesaler, would be open to a return to private ownership because of the pressure of complying with being a publicly traded firm.

(BusinessDesk)

BusinessDesk.co.nz

Comments from our readers

No comments yet

Add your comment:

Your name:
Your email:	Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Anti-spam verification:

Type the text you see in the image into the field below. You are asked to do this in order to verify that this enquiry is not being performed by an automated process.

Related News:

Pacific Edge widens first-half loss as US roll-out gathers pace
Arlene Tansey appointed to the board of Pacific Brands