Mas­sive Mas­ters sell-off be­gins

Australasian Timber - - NEWS -

• Wool­worths will take as­sign­ment of

three resid­ual HTHG leases • Trans­ac­tion ap­proved by Lowe’s and Hy­drox Hold­ings Pty Ltd (Hy­drox), the joint ven­ture com­pany owned by Wool­worths and WDR Delaware Cor­po­ra­tion (WDR), a sub­sidiary of Lowe’s Com­pa­nies, Inc. (Lowe’s) 2. GA Aus­tralia has pro­vided an un­der­writ­ten re­cov­ery for the value of the Mas­ters Home Im­prove­ment (Mas­ters) in­ven­tory and has been ap­pointed to man­age the sell-down of Mas­ters in­ven­tory. The un­der­writ­ten re­cov­ery is sub­ject to cer­tain ad­just­ments and is es­ti­mated to de­liver gross pro­ceeds of ap­prox­i­mately $500 mil­lion • Sell-down of Mas­ters in­ven­tory to be

con­ducted over the com­ing months 3. Sub­ject to Lowe’s con­sent, Home Con­sor­tium (Aur­rum Group, Spot­light Group and Chemist Ware­house) has pro­posed to pur­chase the Mas­ters prop­er­ties through ac­quis­tion of 100% of the shares in Hy­drox. The trans­ac­tion will in­clude 40 Mas­ters free­hold trad­ing sites, 21 Mas­ters free­hold de­vel­op­ment sites and 21 Mas­ters lease­hold sites. Home Con­sor­tium plans to re­pur­pose the for­mer Mas­ters sites into multi-ten­ant large for­mat cen­tres • Wool­worths will ac­quire three Mas­ters free­hold sites and take as­sign­ment of 12 leases to fa­cil­i­tate a com­plete exit of Hy­drox • Es­ti­mated gross pro­ceeds of $1.5 bil­lion from the col­lec­tive sale con­tracts • Es­ti­mated net pro­ceeds of ap­prox­i­mately $500 mil­lion[1] are ex­pected after wind-down costs and prior to any share­holder pay­ments Wool­worths said to­day that, fol­low­ing a seven month sale process, it has agreed three trans­ac­tions to sell its Home Im­prove­ment busi­ness, Hy­drox, to a col­lec­tive bid­der group of GA Aus­tralia, Met­cash and Home Con­sor­tium.

Home Con­sor­tium is com­prised of the in­vestors be­hind three ma­jor Aus­tralian pri­vately owned com­pa­nies - Aur­rum Group, Spot­light Group and Chemist Ware­house Group.

After es­ti­mated wind-down costs, Wool­worths ex­pects to re­ceive pro­ceeds of ap­prox­i­mately $500 mil­lion[2] prior to any share­holder pay­ments, fol­low­ing Lowe’s con­sent to the Home Con­sor­tium trans­ac­tion.

“When I was ap­pointed CEO in Fe­bru­ary, I said ex­it­ing the Home Im­prove­ment busi­ness was a top pri­or­ity. To­day’s an­nounce­ment de­liv­ers on that com­mit­ment. Th­ese agree­ments are the re­sult of an in­ten­sive seven month process of re­view­ing all pos­si­ble op­tions for exit and ex­ten­sive ne­gio­ta­tions. This de­ci­sion means man­age­ment can fo­cus on driv­ing the mo­men­tum in our core busi­nesses,” Wool­worths CEO Brad Ban­ducci said to­day.

“The agree­ments pro­vide cer­tainty to our Mas­ters team, sup­pli­ers and cus­tomers. It is the right res­o­lu­tion for our share­hold­ers. The Home Con­sor­tium trans­ac­tion re­mains sub­ject to Lowe’s con­sent.

“Wool­worths’ top pri­or­ity re­mains to do the right thing by our em­ploy­ees, cus­tomers, sup­pli­ers and share­hold­ers. We will pro­vide a cer­tain and trans­par­ent timetable to all our stake­hold­ers dur­ing the exit process.

“Since the sale process be­gan, our 7,700 staff in the Home Im­prove­ment busi­nesses have worked ex­tremely hard in an uncer­tain en­vi­ron­ment and we sin­cerely thank them for their com­mit­ment.” Mr Ban­ducci said.

The three trans­ac­tions: Home Tim­ber & Hard­ware Group

HTHG will con­tinue to trade and ser­vice in­de­pen­dent hard­ware cus­tomers through­out the coun­try, pro­vid­ing ac­cess to lead­ing do­mes­tic and global brands and prod­ucts as well as lever­age on­go­ing re­la­tion­ships with sup­pli­ers.

Met­cash will ac­quire 100% of the shares in Danks Hold­ings Pty Lim­ited, the hold­ing com­pany for HTHG, for a head­line pur­chase price of $165 mil­lion. Met­cash has in­di­cated that it in­tends to exit two com­pany-owned stores (Gun­gahlin and Launce­s­ton (Dowl­ing St)) and one dis­tri­bu­tion cen­tre (South Dan­de­nong). Wool­worths will take as­sign­ment of the leases for th­ese sites. Wool­worths will work to find staff af­fected by th­ese clo­sures, jobs within the Group and of­fer full re­dun­dancy where jobs are not avail­able within the Group. A de­tailed tran­si­tion plan has been pre­pared.

On 21 July this year, the ACCC said it would not op­pose a bid from Met­cash to ac­quire HTHG from Wool­worths after ac­cept­ing a court-en­force­able un­der­tak­ing from Met­cash. The de­tails of that un­der­tak­ing are pub­licly avail­able.

Mas­ters In­ven­tory

GA Aus­tralia has pro­vided an un­der­writ­ten re­cov­ery for the value of the Mas­ters in­ven­tory and has been ap­pointed to man­age the sale of the in­ven­tory. The un­der­writ­ten re­cov­ery is sub­ject to cer­tain ad­just­ments and is es­ti­mated to de­liver gross pro­ceeds of ap­prox­i­mately $500 mil­lion.

GA Aus­tralia is part of the Great Amer­i­can Group, a wholly-owned sub­sidiary of B.Ri­ley Fi­nan­cial Inc., one of the world’s largest in­ven­tory divest­ment spe­cial­ists.

Mas­ters stores will cease trad­ing on or be­fore 11 De­cem­ber 2016. Un­til then, Mas­ters staff will sup­port GA Aus­tralia to man­age the sale of Mas­ters in­ven­tory.

“We will work hard to find Mas­ters em­ploy­ees jobs within the Group, or pay full re­dun­dancy where suit­able roles are not avail­able,” Mr Ban­ducci said.

Wool­worths will be­gin dis­cus­sions with Mas­ters’ sup­pli­ers im­me­di­ately about the tran­si­tion timetable to min­imise the im­pact on trade sup­pli­ers.

Wool­worths will hon­our all cus­tomer gift cards, prod­uct war­ranties, re­turns and lay-bys, and the com­ple­tion of any con­tracted in­stal­la­tion projects such as kitchens, bath­rooms and floor cov­er­ings. Gift cards can be used at other Wool­worths Group stores and at Mas­ters up un­til clo­sure.

Mas­ters Prop­erty

Home Con­sor­tium have agreed to ac­quire 100% of the shares in Hy­drox.

Wool­worths has granted an ex­clu­sive call op­tion over its two-third share in Hy­drox to Home Con­sor­tium on eco­nomic terms con­sis­tent with Home Con­sor­tium’s pro­posal.

The Home Con­sor­tium will seek to im­ple­ment plans to re­pur­pose the ex­ist­ing Mas­ters sites into multi-ten­ant, large for­mat cen­tres an­chored by a se­lec­tion of Aus­tralia’s lead­ing home, hard­ware, fam­ily and life­style re­tail­ers (sub­ject to land­lord and au­thor­ity con­sents where re­quired).

Joint ven­ture up­date

On 18 Jan­uary 2016, each of Wool­worths and Lowe’s an­nounced their in­ten­tion to exit their Home Im­prove­ment joint ven­ture fol­low­ing Lowe’s no­tice to ex­er­cise its put op­tion un­der the JVA. On 16 Fe­bru­ary 2016, Wool­worth’s ex­er­cised its call op­tion un­der the JVA to ac­quire Lowe’s share­hold­ing in Hy­drox in ac­cor­dance with the op­tion mech­a­nism in the JVA. As of the date of this re­lease Lowe’s cur­rently owns 33% of Hy­drox and Wool­worths owns 67% of Hy­drox.

Wool­worths has ex­er­cised its right to ter­mi­nate the JVA with Lowe’s and WDR, and the as­so­ci­ated op­tion con­tracts aris­ing un­der the JVA, as a re­sult of a dis­pute about the process to value Lowe’s share­hold­ing un­der the op­tion mech­a­nism in the JVA. The con­fi­den­tial­ity pro­vi­sions in the JVA sur­vive ter­mi­na­tion of the JVA and ac­cord­ingly no fur­ther com­ment will be made about any dis­pute be­tween the share­hold­ers.

Citi is act­ing as fi­nan­cial ad­vi­sor to Wool­worths. King & Wood Mallesons is act­ing as le­gal ad­vi­sor to Wool­worths.

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