Retail chain Smiths City has entered into a conditional agreement to sell its retail and finance operations to Polar Capital, for around $60 million.
In an announcement made on NZX on Monday, the company said that following a strategic review, seven of its stores would not be bought and would close. It expects that around 25 percent of its staff will lose their jobs.
Under the agreement, Polar Capital, owned by Big Chill founder Colin Neal, would acquire assets of around $60 million. As it would also take on existing liabilities, including commitments made to customers who have paid deposits or are waiting on delivery, the sale is expected to net around $8 million.
Discussing the reasons for the sale, Smiths City Chair Alastair Kerr said that COVID-19 had delivered a "significant shock" to the business. This meant that the timeframe to deliver a strategic programme to turn the business around was shortened, driving the need for new capital.
Kerr said that steps to preserve cash and contain costs had been taken. "Numerous options" to secure new capital had been explored, including talks with shareholders and other potential investors. He expects a sale to deliver the best result for the company going forward.
“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're hopeful that under new ownership Smiths City will prosper,” Kerr said.
Polar Capital’s Colin Neal said that under the impending sale, Smith City's existing customer commitments would be upheld.
“If a customer has paid Smiths City for a product, they will get the product," Neal said.
Founded in New Zealand over 100 years' ago, Smith's City had been a trusted brand for Kiwis, a legacy the prospective owner said he'll work with the team to maintain.
"I'm 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,” Neal added.
Founded in Christchurch in 1918, Smiths City Group is one of New Zealand’s oldest and largest retail chains, selling a range of goods including furniture, whiteware and home appliances.
It currently operates 29 stores from Whangarei to Invercargill, employing 465 staff.
The agreement is conditional on finance and other factors. Smiths City directors said they expect the agreement to settle on May 22, 2020.
