Kirkcaldie & Stains shareholders have voted in favour of selling to David Jones. Photo / Bloomberg
Kirkcaldie & Stains shareholders have voted in favour of selling to David Jones. Photo / Bloomberg
Kirkcaldie & Stains' sought out an offer from Australian department store chain David Jones to buy the ailing 152-year old Wellington department store, after suffering seven consecutive years of unprofitability, says chairman Falcon Clouston.
Clouston travelled to Australia to approach David Jones, owned by Woolworths Holdings of South Africa, about buying the company after general discussions with retailer Country Road, which is also owned by Woolworths.
"I went to Australia and met David Thomas, chief operating officer of David Jones, and it started from there. That was in February," Clouston said after a shareholders special meeting in Wellington thAZroved the transaction.
"Then it took us right through June to put the deal together. We did all of the deal ourselves; I did it personally, myself. We didn't have other advisers involved, so it was a bit of a drawn out process. But they were generally interested in coming."
Shareholders voted in favour of David Jones taking over the upscale Wellington store and to receive $19.4 million via what will most likely be a court-ordered scheme of arrangement distribution. The deal, which marks David Jones' entry into New Zealand, will see the purchaser pay A$400,000 ($443,000) for the Kirkcaldie & Stains name and take over the lease of its store on Lambton Quay, with the option to buy the retailer's assets for $500,000 within 25 working days.
The company's stock, valued at $8.3 million as at May 31, is not included in the sale. The only outstanding condition now is the purchaser gaining consents from the Overseas Investment Office by November 30.
The Kirkcaldie & Stains department store on Lambton Quay in Wellington. Photo / Mark Mitchell
Facing a competitive retail environment, Kirkcaldie had been unprofitable for the past seven years as it was forced to discount stock to compete with online rivals and multi-shopfront chains that had greater purchasing power, Clouston told shareholders. Department stores in particular have come under pressure, including David Jones, which was taken over by Woolworths and delisted from the ASX last year after sales and profitability fell.
The department store flagged the possibility of a sale to investors at the annual general meeting in February.
At the time, Clouston said the board was considering three options for the company's future - a focus on a retail turnaround, which would take three to five years and considerable investment, downsizing or divesting the business altogether.
"We have spent quite a bit of money in our terms, as a single store, and we haven't been able to make a difference," Clouston said.
Clouston was certain the David Jones offer was the best outcome for investors. At the special meeting a packed room appeared to agree, with 99.46 per cent approving the sale and 99.55 per cent in favour of the company returning $19.35 million to them through a court-approved scheme of arrangement.
Three shareholders questioned the deal, with one asking the board to re-examine the value of the company's intellectual property as it ignored the true heritage value of the brand.
Clouston said he had no appetite for the proposal as it ignored key factors of the deal, including the company's contingent liability concerning its Lambton Quay store's lease, which is in excess of $50 million.
"It's not just Joe Bloggs from the street trying to buy Kirkcaldie & Stains - it had to be a major party," Clouston said.
Kirkcaldie shares surged as high as $2.29 after the David Jones announcement on June 4 from $1.68 prior to the deal, having slumped to a record low $1.58 late last year. The stock last traded at $2.25, giving the company an implied market capitalisation of $23.1 million.
Since the announcement, veteran corporate raider Sir Ron Brierley has lifted his stake in the stock. A substantial shareholder notice filed with the NZX earlier this week showed Brierley's stake had crept up to 8.35 per cent after previously tipping over the 5 per cent notification threshold shortly after the announcement.
"I think he's probably looked at the share price and thought there's something more in it and he can make a little more money so he's bought shares," Clouston said.
Clouston said the company would decide at its annual general meeting next February whether to delist the company and had been approached by several undisclosed companies about using the listed shell for a possible reverse listing.
