Kestelman’s refusal to sell PAS stake bars Coliseum takeover

Larry Kestelman will not sell his 10 per cent stake of PAS Group into the $86m takeover for the ­apparel group.

Melbourne United owner Larry Kestelman.

The founder of internet company Dodo and owner of the Melbourne United basketball team, Larry Kestelman, will not sell his 10 per cent stake of clothing wholesaler PAS Group into the $86 million takeover for the ­apparel group launched last month, effectively blocking the bid from securing full control.

PAS Group chairman Rod Walker also told The Australian the group, whose fashion brands include Metalicus, Review and Yarra Trail, had a hit-list of 20 ­private equity, investment firms, rival retailers and businessmen with whom it would start talks to attract a takeover offer to compete with the one on the table from US investment bank Coliseum Capital Management.

Coliseum, which built up a 19.23 per cent stake in PAS before launching its on-market takeover offer, is attempting to scoop up the struggling clothing wholesaler and brands owner with its offer of 63c a share. After last year’s disappointing sharemarket debut that saw shares in PAS sink 65 per cent below its $1.15 per share offer price, and hitting a low of 41c earlier this year its shares have been dragged lower by profit downgrades, missed earnings targets and tougher trading conditions.

However, the on-market bid from Coliseum has put a floor under the share price and the stock closed at 64c on Friday.

Coliseum is not pitching a hostile bid at PAS or seeking to dump its management team, saying in its bidders’ statement that PAS had “seasoned management and a talented employee base.” “PAS’s ownership of a collection of storeyed Australian brands and ability to fill an under-served niche in the Australian market has the ­potential to continue creating meaningful value,” Coliseum said.

The Connecticut-based Coliseum was co-founded by Adam Gray, who is the chairman of Australian traffic technology company Redflex. It was unclear until now what Mr Kestelman would do with his 10 per cent stake in PAS, but Mr Walker and the clothing group’s chief executive Eric Morris have confirmed he wouldn’t be selling into the offer.

“He (Mr Kestelman) likes our business, he has invested in it, as has Coliseum, and they see the opportunities for growth and they are very comfortable at the ­moment,” Mr Morris told The Australian. “It is important to say they have both been very supportive shareholders,” added Mr Walker. “To be fair I think, (Mr Kestelman) has indicated he will hold,” Mr Morris said.

Mr Kestelman had also confirmed this with Mr Morris.

In its target statement, issued earlier this month, PAS revealed it was fishing for a competing takeover bid after advising shareholders to reject the $86m offer pitched by Coliseum.

Mr Walker said representatives of PAS had cobbled together a list of 20 potential suitors, some of whom had expressed an interest in the clothing maker in the past before it floated on the ASX.

He said the bulk of the potential suitors were Australian-based.