Fisher & Paykel open to offers for finance arm

Whiteware maker Fisher & Paykel Appliances has put subsidiary Fisher & Paykel Finance on the block in a move that could raise about $300 million and see some proceeds returned to shareholders.

F&P Appliances managing director John Bongard said yesterday the decision to review strategic options for F&P Finance came after "a number" of approaches from "all sorts" of potential buyers during the past six weeks.

"We think the time is good for market consolidation and the option we're pursuing at the moment is to sell," Mr Bongard said. "But there are other options and another one might be to buy."

Banks and other large consumer finance companies such as GE Money are seen as potential buyers of F&P Finance.

Ten finance companies, including Bridgecorp, have collapsed during the past 17 months. With high interest rates and a credit crunch, which started in the US sub-prime mortgage market, sweeping the globe, finance companies face rising funding costs with some also facing nervous investors withdrawing funds.

Last week F&P Finance reported a slight rise in interim operating profit before interest and tax to $13.37 million from $13.17 million. Advances to customers stood at $546 million with retail debentures at $149 million.

Managing director Alastair Macfarlane said debenture reinvestment rates, after removing abnormals, were running at between 70 per cent and 80 per cent.

However, banking facilities had been increased by $100 million to $280 million and "positive preliminary discussions" held with Standard & Poor's over a credit rating.

Stephen Walker, managing director of Walker Capital Management which holds F&P Appliances shares, said most shareholders would have liked F&P Finance sold some time ago.

The financing it did to support the appliance business was minimal, Mr Walker said. Market valuations of F&P Finance were about $280 million.

"If a sale does eventuate I'd expect it to be north of $280 million."

F&P Appliances could use some of the proceeds for acquisitions, debt reduction or factory relocations.

"(But) I suspect they'll end up with well north of $100 million of surplus capital which will be returned to shareholders," Mr Walker said.

F&P Appliance shares rose 15 cents to $3.60 yesterday.

Mr Bongard said an information memorandum was being drawn up and would be provided to "legitimate" bidders.

It was reasonable to assume any sale would be completed during the first three months of 2008. However, F&P Appliances would not sell if offers did not exceed the company's own valuation.

- © Fairfax NZ News