The $500m-plus sale process for electronics retailer Jaycar is continuing in earnest, with the competition understood to be heating up.
First-round bids are due next week in the campaign run by investment bank Barrenjoey.
DataRoom understands that the main contenders are expected to be Australian listed retailers JB Hi-Fi and Super Retail Group and local private equity firms including CPE Capital, BGH Capital, Quadrant Private Equity and Pacific Equity Partners.
A purchase of Jaycar would be an unusual move for local fund PEP, given that it typically shies away from investment opportunities in the retail space.
Quadrant has looked at Jaycar in the past.
Jaycar, which deals in electronic components and related products for electronics enthusiasts, generates $60m of earnings before interest, tax, depreciation and amortisation, and expectations are that it will sell for more than $500m.
The company has more than 110 stores across Australia and New Zealand, and also sells products online in Britain and the US.
The business was founded in 1981 when former Dick Smith employee Gary Johnston bought a company previously known as John Carr & Co.
Mr Johnston ran the business until he passed away a year ago.
Market analysts believe that acquisitions are on the agenda for retailers like JB Hi-Fi and Super Retail Group, which are searching for ways to put the cash they have generated in the past two years to work and looking for opportunities to grow future earnings.
Yet it will be interesting to see if such groups are keen to pay up for the Jaycar business as rising interest rates are set to curb consumer spending in the months ahead.
Mergers and acquisitions are continuing in the retail space despite such caution.
On Friday, Woolworths announced an agreement to purchase 80 per cent of online marketplace MyDeal for $1.05 per share, a price that values the business at $243m. This is a 63 per cent premium to the company’s last traded share price. The deal value includes debt.
MyDeal tapped RBC for the transaction while Woolworths worked with Jarden.
While it appears to be a great transaction for MyDeal, some are not quite so sure of the logic for Woolworths.
Analysts at Credit Suisse were particularly harsh, suggesting that the transaction appeared to add no value to Woolworths and seemed contrary to the expectations of some investors for a return of surplus cash.
The price equated to 3.8 times forecast revenue for the loss-making group during the 2022 financial year.
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