PRG's sale of finance arm will free cash to pay debt

Eric Watson's Pacific Retail Group yesterday agreed to sell its finance business for $145 million, concluding nearly a year of deliberations over its future.

The deal with GE Finance, a finance arm of US giant General Electric, will free up cash to repay debt and help prop up its money-hungry British appliance chain PowerHouse.

Watson disclosed plans last December to float Pacific Retail Finance on the stock exchange. But he was rebuffed by investors, partly due to the "Watson factor" - the theory that after a spate of negative publicity the high-profile entrepreneur is no longer a selling point.

The company entered exclusive negotiations with GE in August.

However, protracted negotiations over the transfer of an exclusive arrangement to provide financial services to appliance retailers Noel Leeming and Bond & Bond delayed the deal. PRG sold Noel Leeming and Bond & Bond last year.

Loans generated by the retailers represented a substantial proportion of PRF's $500 million loan book.

The deal is subject to a shareholder vote next month. However, as Watson holds more than 80 per cent of the shares this may be a formality.

The group's other major shareholder, Axa, with about 11 per cent, could not be contacted for comment.

Pacific Retail's shares yesterday rose 2c to $2.

GE Money New Zealand managing director Jim Cock said the buy was an "excellent fit" for his firm.

"We expect NZ consumers to be the biggest winners from this acquisition as we can provide a broader range of innovative products through larger distribution networks," Cock said.

PRG chairman Jock Irvine said the deal would leave the company in a strong position to fund growth in major operating businesses.

Irvine said directors believed they had achieved a fair price for the finance business, as determined by the contestable bidding process and advisers Macquarie New Zealand.

The deal could see $350 million of PRF debentures back in the market, as GE says it will finance the loans itself.

- Additional reporting: NZPA