The owner of iconic Knightsbridge department store Harrods has set its sights on Australia's embattled retail sector after making a $135 million bid for the owner of shopping centre chains Katies, Millers and Rivers.
Al Alfia, an investment company controlled by Qatar Royal Family, who are best known as the owner of London icon Harrods, has made a 70¢-a -share bid for Specialty Fashion Group, an offer that values the business at about $135 million.
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Local businesses face increasing competition
The Australian Retailers Association blames increased rents and international competition for the collapse of Herringbone and Rhodes & Beckett. Vision courtesy ABC News 24.
The bid represents a premium of more than 30 per cent to the Specialty Fashion Group's 52¢ closing price on Tuesday, before news of the bid landed and has surprised a number of local investors, who ran the ruler over the group's stable of budget fashion chains in the past year.
One potential buyer said the price tag on Specialty Fashion Group was too big to pique its interest but it's understood Al Alfia's interest in the mid-market apparel brands is more about geographical diversification than opportunism.
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Sources close to Al Alfia suggest the investment vehicle may buy-up other Australian retail operations as part of a broader push to diversify its global investment portfolio, however it's not believed to be negotiating any other deals at the moment.
One insider said the deal was not an "opportunistic" investment timed to take advantage of the tough market conditions for Australian apparel traders but more a move to increase the vehicles exposure to the Australian market and surrounding regions.
"(Al Alfia) has been in discussions with Specialty Fashion Group for some time, well before these recent corporate collapses," one source said.
In addition to Harrods, the Qatar royal family has a majority stake in UK supermarket chain Sainsburys as part of its billion dollar international investment portfolio.
Specialty Fashion Groups' advisers are believed to have been shopping the business around for at least a year, sparking speculation the operation was battling with the market conditions that have led to the collapse of six high profile Australian retailers since December.
Specialty Fashion Group's share price spiked more than 26 per cent on news of the privitisation bid, a rare good news stories among the daily reports of retail collapses.
One analyst said the price looked "fair" given how badly Specialty Fashion Group's share price had been "beaten up."
The stock traded as low as 49¢ in December last year, coming off a high of 70.5¢ in late August.
Specialty Fashion Group said the proposal was subject to a number of conditions and there was "no certainty" it would result in a transaction.
Smart Sydney suit-maker Herringbone and Rhodes & Beckett added to the apparel carnage this week and there's talk long-running menswear chain Roger David is also struggling along with a number of other well-known Australian fashion brands.
It's understood Roger David has been "on the market" for as long as 18 months, during which time Australian apparel retail has been hard hit by unseasonable weather patterns as well as the Australian dollar and the rise of international labels like Uniqlo, Zara and H&M.;
Market watchers claim the recent slew of collapses will continue as retailers bow to the twin pressures of rising costs, particularly rents and stagnant or falling sales.
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