GUD Holdings, the parent company of small appliances manufacturer Sunbeam, has sold its 19.3 per cent holding in Breville Group, just over 2 years after it made a failed bid to acquire the company in full.
GUD bought its stake in May 2009 for 72 cents per share. When it sold its 25 million ordinary shares yesterday afternoon, it offloaded the holding for a price of $3.35 per share – realising a pre-tax profit of approximately $66 million. This figure represents a 365 per cent increase on the company’s original investment.
Speaking about the sale, GUD managing director Ian Campbell said it was a timely decision considering Breville’s strong performance.
“GUD’s investment in Breville has generated very strong financial returns and the Board has decided to take the profit and exit this investment,” said Campbell.
“We will consider applying the proceeds to a number of initiatives, including internal investment opportunities, potential acquisitions and capital management. We will re-employ these funds in the best interests of all GUD shareholders.”
In December 2009, the ACCC blocked Sunbeam’s attempted acquisition of Breville Group, saying it would “likely lead to a substantial lessening of competition” in the small appliances category, according to ACCC chairman Graeme Samuel.
“GUD Holdings and Breville Group are by far the two largest players in small appliances overall…and for some products they have a dominant sales share in excess of 90 per cent,” he said. “They are each other’s closest competitors.
“If GUD Holdings was to acquire Breville Group there would be a reduction in this competitive tension.”
Speaking to the Australian Financial Review today, Campbell said the decision by the ACCC in 2009 changed GUD’s strategy in relation to Breville.
“When we took the stake originally it was with a view to get our business and Breville’s together and we were knocked back by the ACCC, so it became an investment rather than a broader strategy,” he said.
“I saw Breville’s release for the first half and I thought it was encouraging, and the full-year guidance, and thought that people would probably snap it up,” he added. “I don’t know how you pick the exact time to sell but I was comfortable with the return on that investment.”
The company has not adjusted its underlying EBIT (earnings before interest and tax) outlook for the 2012 financial year, but Campbell said GUD had plans in place for utilising the profits from the sale.
“We’ve got a couple of acquisitions we are looking at [at] the moment and some sort of return to shareholders is not out of the question either. We have a buyback in place and we also have some capital losses we could offset against some capital gains.