Retailer Smiths City set to be sold, seven stores to close

Furniture and electronics retailer Smiths City has entered an agreement to be sold for $60 million to Polar Capital.

In a market update, the NZX-listed company said both its retail and finance operations would be sold to the investment company owned by Colin Neal, founder of refrigerated logistics company Big Chill.

As part of the acquisition, at least seven of Smiths City 29 stores will close, following a strategic review. The final number of stores to be sold is dependent on lease transfers and new lease terms being agreed for those transferring stores, the company said.

Smiths City would not disclose which stores will close.

The company said Polar Capital planned to retain 75 per cent of the existing 465 staff, with about 100 jobs expected to be lost.

The takeover deal is conditional on Polar Capital securing finance and an agreement is expected to be settled by Friday.

The transaction values Smiths City assets at around $60 million, however, the net amount expected to be received is $8 million after debt and other liabilities.

At the end of March, Smiths City first signalled that the Covid-19 crisis had delivered a "material and significant shock" to the business.

Alastair Kerr, chair of Smiths City, said the company had been exploring options for a turnaround of the business but the impact from Covid-19 had forced it to find new capital and speed up the process.

"In addition to taking steps to preserve cash and contain costs in the face of these new trading conditions, the Board has explored numerous options to secure an injection of new capital. These efforts have included discussions with our existing largest shareholders, and other potential strategic investors, to underwrite a broader capital raising. We have been helped throughout this wide-ranging process by our advisers PwC," Kerr told the NZX.

"However, it has now become clear that the transaction we have announced today offers the greatest opportunity for Smiths City to endure for the long term. It also offers the greatest opportunity to protect the jobs of as many of our staff as we can in this uncertain time. We are hopeful that under new ownership Smiths City will prosper."

Colin Neal of Polar Capital said all Smiths Citys existing liabilities would be honoured, including commitments it had made to customers that have paid deposits for goods and those who are awaiting delivery of goods.

"If a customer has paid Smiths City for a product, they will get the product. I am looking forward to working with the Smiths City team to build on this proud legacy. I am also grateful for the resilience and continuing loyalty they and the broader community of partners, have shown as we worked through this period of uncertainty."

Smiths City was founded in Christchurch in 1918 has been part of New Zealand's retail landscape for more than 100 years.