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Kathmandu gains on debut as owners sell out

Kathmandu gains on debut as investors bet retailing will climb out of trough

By Paul McBeth

Nov. 13 (BusinessWire) – Kathmandu Holdings rose on its debut on the ASX and NZX as investors bet retailing is climbing out of its year-long slump, stoking the prospects for the outdoor equipment chain.

Shares of the Christchurch-based company rose as high as $2.29 and recently traded at $2.22, a 4.1% premium on the IPO price of $2.13, valuing the company at $442 million.

The IPO allowed Kathmandu’s owners, Goldman Sachs JBWere and Quadrant Private Equity, to sell their entire stake in the retailer they acquired from founder Jan Cameron in 2006 for $275 million. The IPO raised $422 million after shares were sold near the bottom end of the indicative range. The retail sector has been hit hard as tight lending conditions have forced consumers to pay down their debt in the country’s first recession in a decade.

“There are all these big sales going on week after week and if people are taking advantage of them, how are retailers going to get them back to selling goods at normal margins,” said Alan Moore, who helps manage $350 million at Milford Asset Management.

Sales over the peak Christmas trading period “is the great unknown,” Moore said. “I’m a bit skeptical of these IPOs, the private equity refloats, coming to the market.”

Kathmandu fared better on debut than Australian department store chain Myer Holdings, which tumbled 9% in its ASX debut this month and was last at A$3.92 compared to the price of A$4.10 when private equity firms TPG Capital and Blum Capital sold the business.

Private companies are considering IPOs again in New Zealand after a 22-month drought as the prospects of an economic recovery drives equity markets higher. The NZX 50 Index has climbed 30% from its low in early March. So far this month, South Island-based dairy company Synlait Ltd. and biotechnology company BioVittoria Ltd. have both announced they are going public.

Retail spending data has been mixed since the New Zealand economy edged out of recession with a 0.1% gain in gross domestic product in the second quarter. New Zealanders spent less on their credit and debit cards in October, the first decline in four months.

Figures yesterday showed total retail sales volumes edged 0.1% higher in the three months through September. Warehouse Group Ltd., the biggest retailer on the NZX 50, today said sales in September and October were lower than expected, signalling a slow start to the busiest season.

Still, Kathmandu financial director Mark Todd said outdoor supplies “are quite a niche and specific market” and the company has very little competition at present.

“Business has been reasonably good in retail and this has been reflected in recent weeks – we’re comfortable with our own trading,” Todd told BusinessWire.

The retailer plans to continue its expansion in Australia, New Zealand and the U.K.

Kathmandu founder Cameron may emerge as a threat to the retailer after announcing she will start up a rival chain of outdoor stores.

After the company announced the float, Cameron said she would spend about $27 million on a new company to go head-to-head with Kathmandu, with prices 50% to 60% lower than the chain she founded. She plans to launch some 60 stores across Australasia in December next year.

Todd said Cameron is bound by a restraint of trade agreement until May 2011.


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