South African-listed health and beauty retailer New Clicks Holdings (NCL) has agreed to sell its Australian businesses, comprising the four retail brands Priceline, Priceline Pharmacy, Price Attack and House grouped in New Clicks Australia, to a private equity consortium for Aus$107-million.
Announcing the sale on Monday, New Clicks said the consortium, called Synapse Holdings, comprised ABN Amro Capital, Investec Wentworth Private Equity Nominees and Castle Harlan Australian Mezzanine Partners. They would allow senior management of New Clicks Australia to participate in the equity of Synapse Holdings as well.
New Clicks Australia operates over 300 stores, of which 141 are company-owned and 201 franchised, under the four brands. For the year to end-August 2003 it contributed 7% of New Clicks’ total earnings.
The group first entered Australia with its purchase of Priceline, a health, beauty and lifestyle retailer, in July 1998. It then acquired House, Australia’s largest national home ware and giftware retailer, in December 2000, and Price Attack, the chain of combined hair care retail and hair salon operations, only in July 2002.
It began rolling out the new chain of Priceline Pharmacies on a franchisee basis only in 2003, and now has seven up and running.
New Clicks, which is currently in the process of rolling out an ambitious pharmacy business in South Africa, said that its Australian operations required large capital inflows to grow, either by acquisition or through a strategic alliance with a pharmaceutical distributor.
The board had decided that it could not afford to lose focus and commit resources to addressing the challenges in the Australian market at the expense of its local growth strategy.
Out of the Aus$107-million in sale proceeds, New Clicks would be obliged to retire certain bank debts and financial lease liabilities totaling Aus$21,8-million, while New Clicks Australia and Synapse are obliged to redeem preference shares held by New Clicks for a consideration of Aus$67,2-million.
The company would therefore receive net cash proceeds of Aus$85,2-million.
New Clicks Group Leader Trevor Honneysett said the proceeds would be used primarily to reduce debt and fund the growth of its pharmacy operations in South Africa.
“The disposal comes at a time when the pharmacy initiative in Australia is also taking off, but the board had to give priority to local business,” he commented. “The required capital injection and the management resource needed in Australia means that we cannot pursue both strategies.”
The sale, expected to be completed by February 13 and at the latest by March 8, is subject to several conditions precedent, including approval by the relevant regulatory authorities in both South Africa and Australia.
For the year to end-August 2003, Priceline, with 133 stores, recorded sales growth of 9,3% to Aus$1,59-million and an operating profit before interest and allocation of net support costs of Aus$24,4-million. Priceline Pharmacy recorded an operating loss of Aus$397 000 (before interest and support costs) on franchisee sales of Aus$5,3-million.
Price Attack’s 103 stores reported operating profit before interest and support costs of Aus$3,5-million on franchisee sales of Aus$87,3-million. Finally, House, with 91 stores across the country, saw an operating profit of Aus$2,3-million on franchisee sales totaling Aus$89,6-million.
New Clicks’ shares were up marginally in morning trade on Monday, last quoted on the JSE Securities Exchange South Africa at R7,90 from R7,85 at Friday’s close. Only four trades of 63 900 shares had been transacted. – I-Net Bridge