By Craig Zammit and agencies
MELBOURNE: Australia’s largest retailer, Coles Myer, has confirmed the sale of its Myer department store chain to a consortium headed by private equity firm Newbridge Capital for $1.4 billion.
In a deal announced today, the Newbridge consortium, which includes Texas Pacific Group and part of the Myer family, will purchase all 61 Myer department stores, including the 70,000 square metre Myer Bourke St location.
Former finance director and director of supermarkets at Woolworths and non-executive chairman at Housewares International, Bill Wavish, will join Myer as executive chairman.
The sale of its 61 department stores now leaves Coles Myer to focus on its grocery, liquor and discount variety business. The company now looking to muscle in on Woolworths territory, with a possible return on capital to its shareholders also being considered.
“Our decision to divest has been driven by the board’s belief that both our core food and liquor business and Myer will perform better separated, and that the price Newbridge has been willing to pay for the business recognises that Myer can further improve its performance with singular management focus,” said Coles Myer chairman Rick Allert,
While Newbridge Capital considers the Myer Bourke St location to be a vital ingredient in the $1.4 billion deal, it has signalled no intention to overhaul the store and that the property would be maintained as is.
The costs involved and possible financial losses experienced in revamping the 70,000 square metre store have halted any plans of a make-over in the near future.
With David Jones currently enjoying three times the profit of Myer for every dollar spent in its stores, the improvement of Myer’s profit margins will be one of the first duties for the new owners
Current Myer managing director Dawn Robertson, who has been implementing her own turnaround strategy for some time, will leave her role once all transactions are finalised.
Despite being offered the position of deputy chairman and president, Robertson is expected to receive a hefty $3 million handshake at the door once her time is through after already earning upwards of $18 million from her four-year tenure as head of Myer.
In a statement released this morning, Rick Allert described the agreement as a superb outcome for Coles Myer, for Myer and for shareholders.
"We are delighted that the brand will be owned by a consortium combining one of the world’s leading private equity groups that has strong international department store experience in the US and UK, together with a long and proud connection between the Myer family and the Myer business," Allert said.
Managing partner of Newbridge Capital, Dan Carroll, said: "We welcome the opportunity to bring our skills and experience to Myer in Australia. Our involvement with upmarket department stores, such as Neiman Marcus in the US and Debenhams in the UK, has been very successful, and we look forward to drawing on that experience and using those skills at Myer."
Chairman of the Myer Family company, Rupert Myer, said the investment represented an opportunity to retain a financial interest in the Myer Department Store business.
“The family has had a one hundred year association with Myer and we are delighted to be partnering with such an experienced and successful group in Newbridge," he said.