PRG to spin off star unit

Eric Watson's Pacific Retail Group is planning to spin off its profitable finance arm in a sharemarket listing planned for mid-2005.

The company is expected to have a market capitalisation of $150 million to $180 million.

Speculation that Pacific Retail Finance was being prepared for sale had been circulating for months.

But PRG has signalled its intention to keep a majority stake in a new listed vehicle which could be the subject of an initial public offering early next year.

Existing PRG shareholders are likely to have preferential share entitlements for the listed finance group and independent directors will be appointed to its board.

PRG acting chief executive Steve Smith said the proceeds of the sell-down would be used to fund existing investments and to look at new ones.

"We're going to search the market next year to see what businesses might be around to buy in the consumer sector.

"If we can find another Bendon, that would be fantastic."

Pacific Retail Finance is a shining star in the PRG line-up, which includes the chains Bendon and Living & Giving and loss-making Powerhouse in the UK.

Pacific Retail Finance made a profit of $14.9 million in the year to March and is forecast to make $28 million to $30 million this year.

It has assets under management worth about $500 million.

Smith said taking the finance group public was a natural way of continuing its growth and success.

"The listing will give the finance group greater autonomy and an even stronger market profile, as well as provide funding flexibility to keep pace with rapid projected growth and the resulting enhanced equity requirements."

Powerhouse last month reported a $39.2 million half-year trading loss.

PRG turned in a $55.6 million profit for the period overall, the result of its sale of Noel Leeming and Bond & Bond.

The proceeds provided a welcome injection of funds for PRG, which used some to pay debt and to run Powerhouse.

PRG's majority owner is Watson's Logan Group. Its other sizeable shareholder, Alliance Capital, also approved of the Noel Leeming and Bond & Bond sale.

"We're pretty happy with the transaction they did with Gresham Partners," Alliance Capital portfolio manager Andrew Bascand said last month. "It was about $20 million more than we thought they'd have got for it."

PRG's share price rose 5c yesterday on the back of the latest news to close at $2.05.

Future Float

PRG plans to spin off its finance arm.

It is expected to have a market capitalisation of between $150 million and $180 million.

PRG intends to keep a majority stake.

PRG shareholders are likely to get preferential shares.