What Quadrant Private Equity’s Amart paid for rival Freedom Furniture

Freedom Furniture was purchased by Quadrant Private Equity from Steinhoff’s Greenlit Brands. Picture: Supplied

Quadrant Private Equity’s move to double down on a sector it is trying to distance itself from may have initially been costly for the private equity firm.

But it may lead to a lucrative payday in about one years’ time.

DataRoom can reveal that Quadrant was understood to have written a cheque for somewhere between $85m and $115m for the Freedom Furniture business to merge it together with its Amart Furniture operation that it has been holding for years and had made a number of attempts to sell.

But the game plan is that by creating a company of scale – it will be worth about $1bn combined with 120 stores – it can attract passive index funds once listed on the ASX in about a year.

This is on top of earnings benefits from synergies achieved.

It’s a high risk strategy, and the businesses sell furniture at different ends of the market, but if it goes well, it could prove to be lucrative.

Quadrant is likely betting on the same playbook as other recent private equity listings, such as Guzman y Gomez and Virgin Australia.

Guzman y Gomez is trading strongly after listing last year through a limited sale of shares, because this created more demand in the aftermarket.

Also, its scale meant passive funds, which do not participate in IPOs, have to buy into the deal because the listed business is suddenly of scale.

Bain Capital is hoping the same strategy for Virgin Australia will have the same success.

Amart Furniture, advised by Macquarie Capital, has weighed listing plans before and has also been on and off the market by different advisers.

The business has been profitable, but it’s been held in one of its funds since 2010 and a sale was long overdue.

There’s been no secret, meanwhile, that Steinhoff International has been eager to divest Freedom Furniture, held by its Australian subsidiary Greenlit Brands.

DataRoom reported in February that Greenlit Brands moved into profitability in the past year despite challenging market conditions, placing the business in a stronger position for a potential trade sale or listing in the months ahead.

The company that owned Freedom Furniture and Fantastic Furniture and is run by former boss of The Good Guys, Michael Ford, has now sold several businesses to pay down debt and now has no outstanding borrowings.

For the year to September 29, the company’s revenue fell 5.8 per cent to $442.7m, but it booked a $7.7m underlying profit compared to a loss in the previous corresponding period, according to its accounts lodged with ASIC.

DataRoom understands that Nick Scali Furniture was said to be an underbidder for Freedom, advised by Jarden.

However, most in the market do not see Nick Scali as a serious contender because its focus has been on expansion in the UK market.

Greenlit Brands sold Plush Think Sofas to Nick Scali for $103m in 2021 and offloaded discount department stores Harris Scarfe and Best & Less

Steinhoff International came close to collapse in 2018 following a string of financial scandals.

Furniture retailers say that while trading conditions had been tough in 2024, November and December were better than expected.

The industry largely follows housing market trends.

Harvey Norman is the largest furniture retailer in Australia, with 22.3 per cent market share ahead of IKEA with 11.6 per cent, Amart Furniture with 6.3 per cent while Freedom Furniture and Fantastic Furniture account for 4.7 per cent.

The industry generates more than half of its revenue from lounge and dining room furniture, according to IBISWorld.