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Specialty Fashion Group Shares Surge After Noni B Deal

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By Published On: May 14, 20180 Comments

Specialty Fashion Group’s (SFG) shares have jumped by 46 percent since confirming the sale of its loss-generating brands, Millers, Katies, Crossroads, Autograph, and Rivers to rival company, Noni B.

After weighing up its options in a seven-month strategic review, SFG decided to offload five of its troublesome brands in a $31 million cash sale, while retaining ownership of its most profitable brand, City Chic. After the sale was announced, SFG’s shares jumped up 46 percent to a 10-month high of 55.5 cents.

During the review, the company reportedly discussed a number of options, including whether it should sell all of its brands, sell individual brands, or raise capital to shore up its balance sheet. Ultimately, SFG decided to sell five of its loss-generating brands, which the company’s independent review committee says will “maximise profit for shareholders”.

City Chic will stay under SFG’s ownership, as the company claims it has strong cash flows and revenue growth prospects that make it a promising prospect for shareholders.

However, the decision to sell the five brands wasn’t a unanimous one, as minority shareholders, Lazard and Sandon Capital reportedly pushed for SFG to raise capital, rather than sell key brands at discount prices.

In March 2018, the AFR reported that Sandon Capital’s Managing Director, Gabriel Radzyminski wrote to Specialty Fashion Group’s Chairman, Anne McDonald, saying equity raising would be “preferable to an asset sale at a sub-optimal price”.

SFG received an offer from Anchorage Capital Partners for City Chic and Autograph for $100 million. However, SFG reportedly rejected the deal because of the short timeframe Anchorage provided.

A $75 million offer for City Chic and Autograph from Gary Perlstein, the former chief executive of SFG, and Geoff Levy, the company’s former chairman was also knocked back.

SFG says it will use the $31 million proceeds from the sale to Noni B Group to strengthen its balance sheet, create a stronger platform for future growth, and to resume paying fully franked dividends.

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