Fusion Retail struggles to find a buyer

Private equity funds have run the ruler over the retailer but are reluctant to invest ahead of the all-important Christmas shopping season.

Fusion Retail Brands Ltd, the owner of diana ferrari, Mathers and Colorado shoes, has failed to entice private equity funds that specialise in buying distressed assets, despite a price tag of between $20 million and $30 million.

Hedge funds including Hong Kong-based SC Lowy, investment banks including Nomura Holdings Inc and National Australia Bank Ltd, who hold Fusion Retail’s debt and exercise control of the company, have approached a number of private equity funds that have studied the Melbourne-based company’s business and financial performance.

The funds have come away unimpressed. Fusion Retail has been for sale since April this year but private equity funds who have analysed its business say brands such as diana ferrari are losing customers. 

Moreover, the funds say Fusion Retail's store leases have to be renegotiated soon, an important negotiation just before the all-important Christmas buying season and January back-to-school purchases which are key to the company having enough cash to continue in business.

December accounts for as much as 15 per cent of yearly sales for a typical retailer and about one-third of annual profits, according to Citigroup Inc. Fusion Retail employs 2,200 and has 282 stores across Australia, according to its web site.

Private equity funds that have analysed the Retail Brands say there needs to be a turnaround in the business akin to electronics retailer Dick Smith.

Nick Abboud, Dick Smith’s chief executive, has engineered a successful revitalisation of the electronics retailer bought by Anchorage Capital Partners in September 2012. Anchorage is selling Dick Smith through an initial public offering that will probably take place next year.

Fusion Retail chief executive Don Grover declined to comment on the company’s attempt to sell itself. Grover sold clothing brand JAG to Apparel Group for an undisclosed price last month.

SC Lowy, Nomura and others took control of Fusion Retail, renamed after the collapse of Colorado Group in 2011, after buying about $300 million of the company’s debt at between 30 cents to 50 cents in the dollar.

Michel Lowy, chief executive of SC Lowy, declined comment in an email. Other funds and investment banks declined comment or did not return calls seeking comment.

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