PRG 'exhausted all options' with PowerHouse

Eric Watson finally gave up on PowerHouse yesterday as his company PRG put the failing British electronics retail chain into administration.

Watson - estimated to have a personal fortune of $350 million - also launched a $75.6 million takeover bid for the 19 per cent of PRG he does not already own.

Watson was unavailable for comment yesterday but a spokeswoman said the takeover was independent of the board's decision to place PowerHouse into administration due to "extremely difficult" trading conditions in the UK.

PRG - formerly known as Pacific Retail Group - crossed the globe in September 2003 to pay $47 million for 134 historically profitable stores of a 232-store chain.

Even with a reputation of investing in and turning around underperforming businesses, the PowerHouse challenge had proved too great.

"We have done everything we can to turn PowerHouse around ... and staff are to be commended for their extraordinary efforts and achievements over this time, but we have simply exhausted all our options," said chairman Jock Irvine.

Despite rigorous cost-cutting, reducing store numbers to 53 and a recently trialled re-brand - Go Switch On - across four stores, market conditions were not expected to improve and high fuel and interest costs were forecast to impact into 2007 and beyond.

"Simply, the position for PowerHouse as the number three electrical retailer with less than 1 per cent market share is no longer sustainable," Irvine said.

The company ploughed $35 million into restructuring PowerHouse soon after buying it. Irvine said the final total was "considerable".

Its continued poor performance dragged PRG to a loss of $13.1 million in the year to March.

PRG is now left with its successful lingerie company Bendon and Living & Giving stores.

In what it said was an unrelated move, 81 per cent shareholder Watson's Logan Corp disclosed it had agreed to buy another 12.3 per cent of the company from fund manager AllianceBerstein, triggering a full takeover at $1.22 a share - 33c below PRG's last traded price.

PRG shares have been suspended since July 10 after it missed the deadline to supply its audited result for the year to March to the stock exchange.

The purchase of the stake gave Logan the 90 per cent shareholding required to trigger a compulsory acquisition of all remaining minority shareholdings.

It did not need to wait for PRG shares to resume trading - not expected before mid-August - as the takeover was an off-market transaction.

Although independent advisers would evaluate the offer over the next fortnight, PRG chairman Irvine did not expect that would have any impact because Logan had crossed the 90 per cent threshold.

Liz Style, chief operating officer of Cullen Investments, which owns Logan, said privatising PRG was a "natural progression" and would provide a more flexible investment and operating structure.

"The compliance and operating costs of being a public company are a significant consideration. Given the lack of liquidity in PRG Group's shares, and the fact that its investment portfolio has now consolidated to a smaller size, we believe it is appropriate to privatise the company."