rmbbrave
09-03-2005, 09:25 PM
Aussie jewel heading our way
06 March 2005
FAL plans to list supermarket giant Progressive in NZ, reports GREG NINNESS.
PROGRESSIVE ENTERPRISES will be one of the brightest stars on the NZ stock exchange if its Australian owners complete their plans to spin it off as a separate company.
Progressive operates the Foodtown, Countdown and Woolworths supermarket chains in this country and is currently 100% owned by Perth-based grocery supplier Foodland Associated Ltd (FAL).
FAL completed its takeover of Progressive in 1999, but intends divesting the company as part of a defensive strategy against a hostile takeover bid by Australian grocery wholesaler Metcash.
A senior FAL executive said the most likely scenario was that Progressive would return to being controlled by a New Zealand-based board of directors with its primary listing on the Australian stock exchange and a secondary listing on the NZ stock exchange.
That would immediately make it one this country's largest listed companies.
An independent appraisal of the Metcash takeover by merchant bank Grant Samuel gives Progressive a net value of between $2.056 billion and $2.261b (allowing for $343m of debt).
It is proposed that FAL shareholders will receive one Progressive share for each FAL they own. FAL has 117.8 million shares on issue, which would give the new Progressive shares a face value of $17.45 to $19.19 each.
If the shares traded in that range once the company listed, it would make Progressive the eighth or ninth-largest NZ-based company by market capitalisation, roughly equivalent in value to SkyCity.
And it is the jewel in the FAL crown.
In the year to the end of September 2004, Progressive had sales revenue of $3.841b, from which it generated an operating profit (EBIT) of $172m. This gave it an EBIT total sales figure of 4.47%.
The corresponding figure for FAL's Australian operation was just 3.6%.
But even more telling is the fact that Progressive has been increasing profits at a faster rate than its sales.
Last year its sales increased by 3.7% compared with 2003, while EBIT was up 7.4%.
And FAL is forecasting Progressive's EBIT to grow another 7% this year to $184m.
However, making it on to the stock exchange boards is one thing, staying there may be another.
Across the Tasman, it's almost taken as a given that one of the country's two main supermarket operators - Coles Myer or Woolworths - will make a takeover offer for Progressive.
In its appraisal, Grant Samuel admitted its valuation of Progressive may have been high, but said this reflected "a judgement that the business would be attractive to both Coles and Woolworths . . . who are facing diminishing growth opportunities in Australia."
Of the two, Coles already has a vested interest in the Kiwi market.
It owns the K-Mart department store chain in this country, although the business is a relative minnow, with sales of about $167m last year compared with the $1.477b The Warehouse sold.
Potential buyers of Progressive will be helped by one of the idiosyncrasies of FAL's share register. The company was originally a co-operative grocery wholesaler owned by its West Australian retail customers. They still own about 30% of the company's stock.
These small shopkeepers may not hold their shares if FAL becomes a purely New Zealand company.
If they get a good offer they are likely to sell, which would allow a major stake to be acquired fairly quickly.
So, if there is more than one buyer sniffing around Progressive, it may be a case of first up, best dressed.
06 March 2005
FAL plans to list supermarket giant Progressive in NZ, reports GREG NINNESS.
PROGRESSIVE ENTERPRISES will be one of the brightest stars on the NZ stock exchange if its Australian owners complete their plans to spin it off as a separate company.
Progressive operates the Foodtown, Countdown and Woolworths supermarket chains in this country and is currently 100% owned by Perth-based grocery supplier Foodland Associated Ltd (FAL).
FAL completed its takeover of Progressive in 1999, but intends divesting the company as part of a defensive strategy against a hostile takeover bid by Australian grocery wholesaler Metcash.
A senior FAL executive said the most likely scenario was that Progressive would return to being controlled by a New Zealand-based board of directors with its primary listing on the Australian stock exchange and a secondary listing on the NZ stock exchange.
That would immediately make it one this country's largest listed companies.
An independent appraisal of the Metcash takeover by merchant bank Grant Samuel gives Progressive a net value of between $2.056 billion and $2.261b (allowing for $343m of debt).
It is proposed that FAL shareholders will receive one Progressive share for each FAL they own. FAL has 117.8 million shares on issue, which would give the new Progressive shares a face value of $17.45 to $19.19 each.
If the shares traded in that range once the company listed, it would make Progressive the eighth or ninth-largest NZ-based company by market capitalisation, roughly equivalent in value to SkyCity.
And it is the jewel in the FAL crown.
In the year to the end of September 2004, Progressive had sales revenue of $3.841b, from which it generated an operating profit (EBIT) of $172m. This gave it an EBIT total sales figure of 4.47%.
The corresponding figure for FAL's Australian operation was just 3.6%.
But even more telling is the fact that Progressive has been increasing profits at a faster rate than its sales.
Last year its sales increased by 3.7% compared with 2003, while EBIT was up 7.4%.
And FAL is forecasting Progressive's EBIT to grow another 7% this year to $184m.
However, making it on to the stock exchange boards is one thing, staying there may be another.
Across the Tasman, it's almost taken as a given that one of the country's two main supermarket operators - Coles Myer or Woolworths - will make a takeover offer for Progressive.
In its appraisal, Grant Samuel admitted its valuation of Progressive may have been high, but said this reflected "a judgement that the business would be attractive to both Coles and Woolworths . . . who are facing diminishing growth opportunities in Australia."
Of the two, Coles already has a vested interest in the Kiwi market.
It owns the K-Mart department store chain in this country, although the business is a relative minnow, with sales of about $167m last year compared with the $1.477b The Warehouse sold.
Potential buyers of Progressive will be helped by one of the idiosyncrasies of FAL's share register. The company was originally a co-operative grocery wholesaler owned by its West Australian retail customers. They still own about 30% of the company's stock.
These small shopkeepers may not hold their shares if FAL becomes a purely New Zealand company.
If they get a good offer they are likely to sell, which would allow a major stake to be acquired fairly quickly.
So, if there is more than one buyer sniffing around Progressive, it may be a case of first up, best dressed.