Dick Smith IPO may be pushed out to next year

Fund managers are keen to see all-important Christmas earnings from the electronics retailer before committing.

Dick Smith Electronics Ltd may wait until next year to conduct its initial public offering, giving investors a chance to see further turnaround in the business in the key Christmas shopping period, which accounts for about a fifth of an electronics retailers annual profit. 

If it wants to pursue an IPO by year end, owner Anchorage Capital Partners may offer fund managers a significant discount on any shares they buy to whet their appetite in an increasingly crowded IPO market that may see as many as seven new listings by year end.

Fund managers have been impressed with presentations on the rebound in Dick Smith by its chief executive Nick Abboud. But they want to see more evidence of improved earnings at the company by examining a second Christmas trading period under Anchorage, which bought Dick Smith from Woolworths Ltd in September last year for $20 million. Anchorage paid an additional $74 million to buy Woolworths out of an agreement that would have seen Woolworths collect a proportion of the sale proceeds when Dick Smith was sold.. Anchorage declined comment.

Citigroup Inc estimates 19 per cent of an electronics retailers’ yearly profit occurs in the month of December. The Australian Retailers Association puts spending in shops at $41.2 billion, or 16 per cent of total annual expenditure, from mid November to the end of December.

Still, the more than doubling in the share price of electronics retailer JB Hi-Fi Ltd. this year has encouraged Anchorage to try and push for a Dick Smith IPO by December. Anchorage has hired Goldman Sachs Group Inc and Macquarie Group Ltd to manage the Dick Smith share sale.

The private equity firm is expected to make a substantial profit on its investment, estimated by some to reach more than five times the equity invested.

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