Godfreys co-founder bids to buy back business
Godfreys' 99-year-old co-founder John Johnston has lodged a bid to purchase the beleagured vacuum retail chain and take it private.
Johnston, who co-founded the specialist retailer with Godfrey Cohen in the 1930s, has made a 32 cent per share cash offer for the business, a 41 per cent premium on its closing price on the ASX on Monday.
In a statement lodged by Godfreys to the ASX after close of trade on Monday evening, Arcade Finance, which is owned by Johnston, said that its offer represented a compelling out for shareholders that remain exposed to further decline in the company’s fortunes.
“Having been actively involved in the success of Godfreys since its founding, Johnston is eager to see Godfreys rejuvenated and living up to its full potential,” Arcade said.
Godfreys booked a $58.6 million loss for the first-half of fiscal 18 on write downs and a 8.9 per cent decline in top line sales, the latest in a lengthening line of deteriorating trading for the business.
Arcade is Godfreys largest shareholder, with a 25.4 per cent stake in the business and a further 2.65 per cent under former CEO and Arcade associate John Hard’s family trust.
The offer, which values the business at $13.09 million, will open on 24 April and will close on the evening of 24 May, unless extended, with the door being left open to making its offer for the business compulsory if it acquires a 90 per cent stake.
Godfreys’ board has said that it is assessing the offer and will provide guidance to shareholders, alongside an independent report into the bid, in due course.
“The board will be appointing an independent expert to provide an opinion as to whether the offer is fair and reasonable,” Godfreys told shareholders on Tuesday morning.
Arcade did not go into detail about its plans for Godfreys if its bid is successful but said it would continue the operations of all current franchises and rationalise “certain head office activities” after taking the company private.
“Arcade believes that the restructuring required to restore Godfreys value would be best carried out in an un-listed private company environment,” Johnston said in a letter attached to the offer.
Johnston oversaw the day-to-day operations of Godfreys for 70 years until 2006, when the business was sold to private equity firms Pacific Equity Partners and Unitas Capital.
In 2011 Johnston was part of a group of investors who bought back the business before it was listed on the ASX in 2014 for $2.75 a share – a price that has since fallen by 92 per cent.
Godfreys has been struggling to deal with intensifying competition from the likes of Harvey Norman. JB Hi-Fi. Target and Aldi s well as transition its business to capitalise on the growth of e-commerce.
“They really haven’t established an exclusive distribution deal with any brand. When Aldi and Target are selling Dyson, I’m not sure how Godfrey’s can compete,” Queensland University of Technology associate professor Gary Mortimer said.
But in February, on the recent appointment of Jason Gowie as chief executive – its third CEO in as many years – the business signalled a broad-based turnaround plan that included a shift away from franchising and towards online.
“Johnston remains passionate about Godfreys and its long term future and sees the current takeover bid as the best way to turnaround the company,” a statement on Arcade’s website reads.
“If the takeover bid is successful, Johnston will resume full ownership of Godfreys and undertake the necessary steps to restore Godfreys value.
“This will secure the future of the company, its more than 200 stores and the jobs of more than 400 Godfreys employees,” Arcade said.
It is not yet known what Godfrey’s second largest shareholder, listed investment firm NGE Capital, which together with shares of associated Kentgrove Capital, has a 13.7 per cent stake in the business, thinks of the proposal.