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Catalyst Sells 12.5 Million Adairs Shares

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By Published On: May 15, 20180 Comments

Private equity firm, Catalyst Investment Managers has dumped 12.5 million of its Adairs shares, a figure that equates to a quarter of its stake in the Australian bedding retailer.

In a recent ASX announcement, Adairs confirmed that Catalyst has sold a significant portion of its shares in the company.

“Catalyst has informed Adairs that pursuant to the block trade agreement, the Catalyst shareholder entities have agreed to a 90-day escrow in respect of the remaining shares, subject to a number of customary exceptions,” the report read.

Following the completion of the sale, the Catalyst shareholder entities will continue to hold in aggregate an estimated 40 million shares in the bedding and homewares company.

Catalyst had told the media mid last week that its preference was to sell its full 31 percent holding to a single third party, triggering a takeover bid. However, when the market closed on Friday the company had only sold a portion of its shares.

The 12.5 million shares were reportedly sold in a block trade for $2.20 a share, which was discounted from the $2.23 share pricepoint at the time of the sale. Catalyst sold a quarter of its shares after a seven percent surge in the bedding retailer’s share price last week, when Adairs’ CEO, Mark Ronan upgraded the company’s profit guidance for FY18. 

Adairs

Catalyst has sold 12.5 million Adairs shares for $2.20 a share.

Catalyst’s quick sale has likely come as a surprise to Adairs, after Ronan told investors at its Annual Strategy Day last week that a sale isn’t something that needs to happen anytime soon.

“But it’s not something that needs to be done in three to six months, it’s more like an 18-month to three-year journey before that stake comes on the market,” Ronan said.

As part of the annual strategy gathering, investors toured Adairs stores in both Melbourne and Sydney, where Catalyst allegedly talked up the company’s takeover potential to several media outlets. This talk sparked rumours by both the AFR and The Australian that Adairs could become a target for Myer’s harshest critique, Solomon Lew, whose listed investment company already owns the likes of Just Jeans, Dotti, and Portmans, to name a few.

Over the last 12-months, Adairs shares have risen from 77 cents to $2.23, which is still below its issue price of $2.40 back in June 2015. This gradual increase has come after shares dropped by 77 percent in 2017 after a series of profit downgrades, which saw the price per share fall to 57 cents.

The sales issues that were cited in 2017 have since been rectified, with Ronan increasing the company’s FY18 profit guidance to between $44 and $46.5 million, up from $30.8 million in 2017.

Catalyst now owns 24 percent of Adairs and has agreed to hold onto its remaining shares for at least 90 days.

Adairs told investors in its ASX announcement that an updated, more in-depth shareholder notice will be lodged by Catalyst when the sale is completed at the end of the 90-day escrow period.

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