EXCLUSIVE: Major South African Group Tipped To Be Buying The Good Guys For $900M
Freedom Furniture owners, Steinhoff Asia Pacific, a subsidiary of Steinhoff International Holdings is believed to be close to owning The Good Guys or at a minimum a controlling share in the mass retailer according to sources.
ChannelNews has been told by internal sources at The Good Guys that the South African retail group has already agreed to fund a buyback of The Good Guys store managers shares in the Company.
The Good Guys who have been talking to various venture capital and investment banks including the Blackstone Group has had an up for sale sign up for up for over four years, with several interested telling ChannelNews that the asking price was “simply too high” to justify a buyout or an investment in the Melbourne based Company.
The Good Guys’ 97 outlets are jointly owned by the family’s Muir Investments and the store managers.
Muir Investments is owned by Andrew, his sister Carolyne and his mother Joan. The family is understood to have wanted close to $1 billion for the business, which generates about $100 million in earnings before interest, tax, depreciation and amortisation on more than $2bn in annual revenue.
It was only a week ago that The Good Guys management was telling certain media organisations that any talk of a takeover was a “hoax”.
Markus Jooste the CEO Steinhoff International has transformed the South African manufacturer of household goods into a major retail operation, he has done this by acquiring manufacturers and existing retail chains, The Good Guys is believed to be his latest target.
He expanded the company through acquisitions including the 2011 purchase of France’s Conforama which, Jooste told the South African Financial Mail, “was a game-changer” because it essentially doubled Steinhoff’s purchasing power and added six new countries to its retail footprint. Jooste has also shown a knack for canny real estate investments, including buying 49 prime sites along with Austrian retailer Kika-Leiner in 2013.
Last Week, Good Guys Management said that they had put into plans to transition to a fully corporatised business model in mid-2016.
A Company spokesman at the time said “The transition to a more corporatised model has been in the works for some time. It is the logical next step in the evolution of The Good Guys. It best supports the current strategy of growth and improved performance and will deliver greater consistency and enable more innovation.”
ChannelNews understands that 57 store owners currently under the joint venture partner model are currently being bought out, they consist of 15 in Victoria, five in SA/NT, nine in WA, 13 in NSW/ACT and 15 in QLD.
Sources have told Channel that the Muir family is believed to have negotiated a sale price of between $900 million and one billion dollars. A condition is said to be that the shareholdings owned by joint venture partners is acquired by June 2016.
A letter recently circulated to store managers and suppliers and obtained by ChannelNews says under the heading, Important Changes to The Good Guys Business in the Pursuit of Remarkable Retail’
CEO Michael Ford said ” Andrew Muir has announced that he intends to accelerate the transition to a corporate structure during mid-2016. The transition to owning 100% of The Good Guys store network will be completed through the buy-out of the remaining 57 Joint Venture Partners. Currently there are already 43 centrally-owned The Good Guys stores.
An early part of our transformation journey was the centralisation of our supply chain and inventory management. Together we weathered the immense change of migrating to a centralised order book which, with your support, has led us to improvements in our customer experience and operating results.
However, for The Good Guys to be recognised universally as Remarkable, we must deliver on our promise consistently. The customer experience must be consistent; and our performance, in our stores, at our support centre, and through our suppliers, must be consistent. We need to be at the cutting-edge in order to anticipate the changing needs of our customers, and we need to create a consistent platform for our staff to achieve Remarkable results.
As a trusted supplier partner, we wanted you to know about this intention to centralise as soon as our internal teams were made aware.
The business model may be changing but our commitment to our suppliers, our employees, our customers and our local communities will not change. Furthermore, we will continue to be a family-friendly business, operating with ‘family values’.
Whilst this will create change in our stores, our previous collaboration with you to centralise the order book means that little will change in our working relationship with you as a result of this decision. We will keep you informed as the transition unfolds and ask for your support during this transition period.
Should you have any questions with regards to this announcement, please do not hesitate to contact our Chief Merchandise Officer, Geoff Reader.
Andrew Muir is understood to have been working with boutique Melbourne-based advisory firm Helfen Corporate Advisory.