The $800m listed furniture retailer Nick Scali is thought to be inching closer to an acquisition of Coco Republic as the field narrows in the sales contest.
It is understood that non-binding bids for the business were due about two weeks ago and the company’s adviser, Allier Capital, is now negotiating with a small number of parties.
Nick Scali is thought to remain in the mix and many believe that it is the most logical acquirer.
Nick Scali’s share price has seen a major lift during the pandemic as consumers upgrade furniture upgrades for the home.
Shares have soared from about $3.50 a year ago to more than $10, which would make a capital raising the logical way to fund an acquisition.
Coco Republic sells upmarket furniture, homewares, lighting, rugs art, outdoor furniture and storage products and also offers interior design services.
Some estimate Coco Republic will sell for at least $100m. The business is believed to generate between $15m and $20m of earnings before interest, tax, depreciation and amortisation.
Some prospective buyers have been wary about the performance of Coco Republic once international travel resumes after conditions return to normal.
However, given Nick Scali’s share price has been inflated, a deal would still be worthwhile — even if it was paying a higher price than in normal conditions.
According to Coco Republic’s accounts, shareholders include Paul, Dale and Anthony Spon-Smith and Jeremy Byrne.
Run by Nicholas Foster, it entered the US market in 2019 through Californian retailer HD Buttercup and has eight showrooms located in Melbourne, Brisbane, the Gold Coast and Auckland.
Its sale process comes after Steinhoff International subsidiary Greenlit Brands tried to float industry rival Fantastic Furniture late last year.
The hope was for Fantastic Furniture to list through Macquarie Capital and Credit Suisse with a market value of between $430m and $530m, equating to 11 times its annual net profit.
The other furniture business currently up for sale is the Melbourne-based Focus on Furniture through Monash Private Capital, while Quadrant Private Equity has been looking to offload its AMart business through adviser Jefferies for some time.
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