Whitcoulls sale to Kiwis tipped

Whitcoulls owner REDGroup's creditors are owed $21.5 million. Photo / Greg Bowker

Hundreds of staff employed by Whitcoulls and Borders in New Zealand may soon find out how much longer they are likely to have jobs.

The administrators of the bookstores are believed to be close to announcing a new buyer that will return the company to New Zealand ownership.

Australian private equity firm Pacific Equity Partners (PEP) bought Whitcoulls and Australian book chain Angus & Robertson from British bookseller WH Smith for A$135 million ($182 million) in 2004. PEP later added 32 Borders stores. The company was placed in administration in February.

Landlords have been told an announcement about the New Zealand business is imminent, and it is believed all the stores have conducted stocktakes over the past week.

The publishing industry is rife with rumours about who the new owner might be, with much of the speculation centred on whether the chains' main rival, PaperPlus, has been successful in bidding for the troubled group.

Other suggestions include The Warehouse, and former Whitcoulls' owner Graeme Hart.

While most staff are expected to retain their jobs, many publishers believe the deal is likely to mean the closure of Borders in New Zealand.

A spokeswoman for the Australian firm handling the administration, Ferrier Hodgson, said yesterday an announcement was possible within the next 10 days. The most lucrative parts of the troubled group have already been sold off.

Ten airport stores - described by one industry insider as having a "licence to print money" - have been sold to international retailer LS Travel Retail Pacific, and will be converted to the Relay brand.

Eight Bennetts bookstores have been sold to private investor Geoff Spong, the former owner of textbook retailer VOL.1 Bookshops. About 62 Whitcoulls and five Borders stores are still for sale, plus the Australian arm of the business.

While the situation looks grim in Australia, unsecured creditors collectively owed more than $21 million in New Zealand are also getting restless.

One Auckland creditor told the Herald yesterday he was furious to receive a "take it or leave it" offer from the administrators.

The creditor, who did not want to be named, said he had been offered only 20 per cent of his claim unless he agreed to collect all of his stock from individual stores, and provide proof of ownership.

He described the offer as "nasty and cynical", as it was unrealistic to expect small suppliers to collect their own stock, and providing proof of ownership was "patently impossible".

"They're really just trying to force us to take the 20 per cent," he said.

Another Auckland supplier owed "tens of thousands of dollars" said yesterday he was aware of many other frustrated creditors.

The supplier, who also wanted to remain anonymous, said the book chains accounted for a "significant chunk" of his sales.

Not only had the company delayed payment terms, significantly affecting his cashflow, it was also placing orders based on sales history, rather than welcoming new products.

"It's affected my entire business. Normally at this time of year, we'd have regular replenishment orders coming through on a weekly or bi-weekly basis, but we're getting very little at the moment. Because the company is effectively being run by accountants, they're effectively using accounting principles to making their purchasing decisions."

The supplier said his company had introduced new products late last year which had sold "really well", but no new orders had been placed after the administrators took over.

"The frustrating thing for all of us who are owed money is the administrators are being paid these huge fees, and the longer this goes on, the bigger the fees will get.

"And the longer this takes, the longer Whitcoulls will lose business it will never regain because people like us are discovering other outlets, like online, that are actually much better and much cheaper to deal with."

The story so far
* REDGroup, which owns Whitcoulls, Borders and Bennetts, went into voluntary administration on February 17.

* Creditors are owed $21.5 million.

* 10 airport-based Whitcoulls stores and eight, university-based Bennetts stores were sold last month.

* 62 Whitcoulls stores and five Borders stores remain.