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 being marketed for sale because its current shareholders — mainly private equity owners and lender-shareholders — are not natural long-term owners and are looking to divest either the whole group or individual brands. The sale process was also prompted by renewed interest from trade buyers.
The group, renamed Fusion Retail Brands, is majority-owned by private equity firms Anchorage Capital Partners and Ice Canyon, with lenders National Australia Bank, Rabobank and Nomura also holding shares after converting debt to equity.
Shareholders have enlisted PricewaterhouseCoopers to run the sale process for Fusion Retail Brands, managing the marketing and potential buyer engagement for the group or its individual brands.
According to Fusion chief executive Don Grover, the latest sale attempt is not a distressed sale. Management says progress has been made in restructuring, although the turnaround is not yet complete.
The group's 2012 accounts showed sales revenue of $244.4 million and a net loss of $13.2 million. For everyday investors, that points to ongoing challenges: while revenue is substantial, the business was still loss-making at that reporting date, increasing the importance of assessing recent restructuring progress and current trading before considering any investment.
Buyers are likely to target individual brands that can be bought cheaply. JAG is highlighted as a small but potentially attractive brand because recent marketing — including ambassador Ruby Rose and social media campaigns — has boosted its youth-market awareness and aided a revival of the denim label.
Investors should note that Colorado has a history of rapid, debt-fuelled expansion before the global financial crisis, has undergone major store closures under receivership, and operates in a footwear market that the article describes as particularly difficult and not yet improving. These factors increase operational and market risk despite debt being reduced.
About 18 months ago offers for the business and related brands reportedly ran to about $110 million but did not meet seller expectations, with some suggestions offers were as low as $70 million. That history suggests current buyers may still look for bargain prices, especially for individual brands rather than paying top dollar for the whole group.
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