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Pacific Brands sees no offer from KKR, others

by Laura Board | Published May 15, 2012 at 9:37 AM

Australian clothing maker Pacific Brands Ltd. Tuesday, May 15, put paid to bid hopes, saying it didn't expect to receive a "definitive" takeover proposal from Kohlberg Kravis Roberts & Co. LP or any of the other parties that had made initial inquiries.

Melbourne-based Pacific Brands gave the update more than four months after disclosing an approach from the New York buyout firm. Just over a month later in February it disclosed further bid interest from unidentified parties.

"Having explored these enquiries, the board of Pacific Brands has concluded that a definitive proposal for the acquisition of the entire issued capital of the company is unlikely to be forthcoming in the near term," it said.

It also reiterated a gloomy second-half outlook, saying it expects Ebit and net profit before one-time items to be significantly down on the first half, and revenue to be lower, because of "weak retail conditions and changes to the customer base." Full-year Ebit before one-time items will be about A$125 million to A$130 million ($125.1 million to $130.1 million), it said. (Ebit before items was A$186.2 million last year, while write-downs and restructuring costs pushed the company to a net loss of A$131.9 million in 2011).

Pacific Brands shares fell 5.7% to A$0.585, giving the company a market value of A$534.1 million. Before the announcement of the KKR approach, Pacific shares had closed at their lowest level since around June 2009.

The retreat of KKR dashes hopes of renewed private equity interest in other undervalued, Australia-listed consumer goods and retail companies. Outdoor clothing chain Kathmandu Holdings Ltd. closed down 1.6% in Sydney, while electronics retailer JB Hi-Fi Ltd. lost 2.2%. TPG Capital in February launched an unsuccessful pursuit of swimwear and board-sports clothing company Billabong International Ltd. but failed to gain due diligence access. Reuters reported that TPG had also contemplated a bid for Pacific Brands.

Pacific Brands labels include Berlei and Bonds underwear and Sheridan sheets. Its heritage dates back to 1893 when it began manufacturing Dunlop bicycle tires.

In 1985 it started life as a corporate entity when the now-defunct conglomerate Pacific Dunlop Ltd. bundled its consumer businesses together into a separate division.

In 2001 CVC Asia Pacific Ltd. and Catalyst Investment Managers Pty. Ltd. acquired Pacific Brands for A$730 million.

Its owners sold the business in a A$1.25 billion initial public offering in March 2004 priced at A$2.50 per share.

Pacific Brands, whose CEO is Sue Morphet, took advice from Flagstaff Partners Pty. Ltd. and law firm Minter Ellison.

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Pacific Brands sees no offer from KKR, others

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