Investors put Colorado on the block
The retailer, which also specialises casual wear, is majority-owned by two private equity firms, Anchorage Capital Partners and Ice Canyon. The two investors wound up with the business having converted their debt to ownership in shares. Lenders, the National Australia Bank, Rabobank and Nomura are also shareholders.
There were attempts to sell the business and others in the stable, renamed Fusion Retail Brands, including JAG and Mathers, 18 months ago but offers that ran to about $110 million, did not meet expectations according to industry insiders. There were suggestions that offers at the time reached only $70 million.
Since then a new management team has been working on restructuring the businesses, growing the omni-channel outlet and taking costs out of the businesses.
When Colorado collapsed more than 1000 jobs were lost and lenders were owed $430 million.
The current shareholders are not natural owners and as such are looking at every opportunity to offload the group as a single business or individual brands.
They have enlisted PricewaterhouseCoopers to run the sale process, which was triggered by some renewed interest from trade buyers.
Fusion chief executive Don Grover told BusinessDay the latest attempt is not a distressed sale and progress has been made in restructuring the business, although he said the turnaround is not complete.
Even so, retail insiders provide plenty of anecdotally based views that Colorado in particular is doing it tough in the current environment.
The latest set of accounts - for the 2012 financial year - show the group's sales revenue of $244.4 million and a net loss of $13.2 million.
Buyers that are taking an interest this time around will probably be looking to pick up brands on the cheap rather than pay top dollar.
The small brand of potential interest is JAG, which has been recently attracting exposure thanks to its use of singer and TV presenter Ruby Rose as an ambassador.
The use of Rose and an infectious social media campaign has been successful in raising the brand's awareness and credibility in the youth market. JAG was the sought after denim brand of the 1970s and a couple of generations on it is now staging something of a revival.
Colorado, which also specialises in adventure-wear clothing, is the flagship brand within Fusion and remains a bigger task.
Under the command of receivers over the past few years, a major stores closure has taken place, and costs have been gouged from the business.
Like other retailers in the pre-global financial crisis, Colorado engaged in a debt-fuelled expansion opening hundreds of retail outlets. In 2006, Singapore-based Affinity launched a takeover of the firm, valuing the retailer at $450 million
Colorado is no longer lumbered with this debt burden but has to make a return in a particularly difficult footwear market, which is not yet showing any signs of improvement.
Frequently Asked Questions about this Article…
Colorado is up for sale because its majority owners — private equity firms Anchorage Capital Partners and Ice Canyon, along with lender-shareholders — are not natural long-term owners and are looking to offload the group either as a single business or by selling individual brands after a period of restructuring.
Colorado is majority-owned by Anchorage Capital Partners and Ice Canyon, who converted debt into shares to end up with ownership. Lenders including National Australia Bank, Rabobank and Nomura also hold shares following the company’s earlier collapse and restructuring.
According to Fusion Retail Brands chief executive Don Grover, the current sale attempt is not a distressed sale. Management says progress has been made on the turnaround, although the restructuring is not yet complete.
PricewaterhouseCoopers (PwC) has been engaged to run the sale process. For investors, an adviser like PwC can help manage an orderly sale, attract trade buyers and provide transparency around bids and valuations.
The group’s 2012 accounts showed sales revenue of $244.4 million but a net loss of $13.2 million, indicating the business was still losing money at that time and highlighting the execution and profitability challenges investors should consider.
Smaller, revitalised labels such as JAG are likely to attract buyer interest. JAG has gained recent exposure and credibility in the youth market through a successful social media campaign and a celebrity ambassador, singer and presenter Ruby Rose, making it a more appealing standalone asset.
After Colorado collapsed, more than 1,000 jobs were lost and the business underwent major store closures while under receivers over recent years. Costs have been pared back as part of the restructuring to stabilise the business.
Key risks include the tough footwear and retail market, incomplete turnaround work, past debt-fuelled expansion that led to receivership, and historic losses. Buyers may also expect to purchase brands at discounted prices rather than paying top dollar.
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