Warehouse snaps up Noel Leeming

CLAIRE ROGERS
Last updated 11:28 10/12/2012

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The Warehouse has purchased Noel Leeming Group for $65 million - $73m less than its previous owners paid for it eight years ago.

Noel Leeming Group includes 92 Noel Leeming and Bond & Bond consumer electronics stores.

The Warehouse has bought the group from Australian private equity firm Gresham, which paid Eric Watson's Pacific Retail Group $138.5m for it in 2004.

In November last year Gresham appointed investment bank Macquarie to advise it on its options for the business.

Coriolis Research analyst and director Tim Morris said the move by The Warehouse was ''eminently sensible'', because it had long struggled to get reputable brands on board - particularly in its consumer electronics and appliances division.

He expected The Warehouse would bring some of Noel Leeming's brands into to its stores, but it would likely keep the range limited.

''I don't think they're going to remove women's underwear and fill that space with fridges.''

The acquisition also boosted its property portfolio, giving it options to move stores in its stable around different sites - for example, replacing a Noel Leeming store with a Warehouse Stationery store if it made sense.

But electronics retailing remained an ''ugly space'', with players hit hard by massive price reductions on products such as flat-screen televisions, Morris said.

In a statement to the NZX, The Warehouse said the purchase would ''support its transformation into New Zealand's pre-eminent non-food retail business'' and support its ongoing strategy to improve its performance.

It said the consumer electronics and appliances sector had ''experienced substantial growth over the past five years and as people continue to purchase technology and entertainment products in an increasingly 'connected' world, the sector will continue to grow''.

Noel Leeming Group will operate as a separate trading division, and The Warehouse will retain its management team.

The Warehouse Group chief executive Mark Powell said it was impressed with the performance of Noel Leeming over the past three years.

The acquisition will be funded through existing debt facilities. The Warehouse Group said it expected Noel Leeming Group to contribute $4 million to $6 million of earnings before interest and tax to its first-half results.

Noel Leeming reported a $615,000 net loss for the year to March 31, an improvement on the previous year's $3m loss.

Revenue rose 7.6 per cent to $607.8m.

Shares in The Warehouse are trading up 1.29 per cent to $3.13 on the NZX this morning.

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- The Dominion Post

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