By Sue Mitchell
Australia's largest online book retailer, Booktopia, is pressing ahead with plans for a $150 million initial public offering despite the threat of increased competition from global e-commerce giant Amazon and its British-based subsidiary The Book Depository.
Five months after hiring investment bank Investec to advise on strategic options, including an initial public offering, trade sale or a capital raising, Booktopia has appointed investment banks Ord Minnett and Morgans as lead advisers on a potential float in the second half of calendar 2016.
Tony Nash is preparing to float his family's online book retailer, Booktopia. Credit: Louise Kennerley
"When you do these things it's always full steam ahead," chief executive and largest shareholder Tony Nash told Fairfax Media on Tuesday.
"There are no guarantees when you prepare for an IPO, but we are definitely doing everything to ensure if it looks like we can [float] we're ready."
Mr Nash plans to sell some of his shares in the family-owned company, but says most of the capital raised in the IPO will be used to fund expansion and supply chain and distribution improvements.
"There will be a small sell-down on my side, but mostly it's about the future," he said.
The IPO is expected to value Booktopia at up to $150 million, based on sales of $80 million in 2016 and forecast sales of more than $100 million in 2017.
Gaining momentum
Its sales have almost doubled since the acquisition early in 2015 of its largest Australian competitor Bookworld, the online retail arm of publishing house Penguin Random House.
The Bookworld acquisition boosted Booktopia's share of the domestic online book market from 62 per cent to more than 80 per cent.
Booktopia now ships more than 4 million books a year from a 10,000-square-metre automated distribution centre at Homebush, in Sydney, and holds 750,000 units and 110,000 titles in stock.
Mr Nash said Booktopia was unfazed by the imminent expansion of Amazon's The Book Depository.
The Book Depository has signed up a third-party distribution partner, cutting delivery times, and reached agreement with local publishers to add another 25,000 Australian titles to its catalogues, making Australian books more accessible to consumers in this country and overseas.
Mr Nash said Booktopia's prices were already competitive compared with The Book Depository and the British-based retailer's new Australian titles were already available in Australia.
However, Australian investors could be wary of the prospect of increased competition in the $1.8 billion book market, particularly given the poor performance of several recently listed pure-play online retailers.
Online space
Shares in online furniture and homeware retailer Temple & Webster have plummeted since February, when the retailer warned of widening losses after sales fell short of forecasts.
Shares in online action sports retailer SurfStitch tanked after it abandoned full-year profit guidance and co-founder and chief executive Justin Cameron resigned, purportedly to pursue a privatisation bid.
"It's business as usual for us," Mr Nash told Fairfax Media in February. "We've grown under the shadow of Amazon and The Book Depository and we've grown at 30 per cent-plus every year. They've never been a threat to us."
Mr Nash founded Booktopia about 13 years ago with his brother-in-law Steve Traurig, sister Elana Traurig and brother Simon Nash. The family owns more than 90 per cent of the business and the remainder is shared among staff.
IBISWorld says the Australian online book market is worth $231 million and is increasing 15.5 per cent a year.
Online book sales represent about 7 per cent of the market, well below penetration rates in Britain and the US, suggesting room for expansion as consumers buy more books online.