Postie Plus Group Shareholders to Vote on Sale of Babycity

NZX and Media Release 9 May 2012

Postie Plus Group Shareholders to Vote on Sale of Babycity Chain

Postie Plus Group (PPGL) shareholders will vote this Friday (May 11) on a deal to sell the Babycity chain as an important step in its growth strategy to acquire complementary brands to further develop its nationwide retail footprint.

The sale of Babycity will enable PPGL to focus on expanding its flagship Postie brand nationwide and provide funds for further acquisitions, the company says. The sale, if approved, is expected to add to earnings and net the family friendly apparel retail group $4.1 million.

The proposed deal is to sell 11 of the 18 Babycity stores, stock and forward orders worth some $5.6 million to Baby City Retail Investments, a company operated by former LV Martin manager Trevor Douthett. Baby City Retail will also take on specific liabilities, resulting in a net amount payable estimated at just over $4.0million.

Baby City Retail Investments will have an option over an extra five stores. An update will be given at the shareholder meeting on Friday, May 11 in Christchurch.

Postie Plus will continue to supply apparel to the Babycity chain under a wholesale agreement, and has signed up to a five-year restraint of trade in infant hardware retailing.

The deal needs shareholder approval because the total transaction value exceeds more than half the company’s 20-day average market capitalisation of $9 million.

If shareholders reject the Babycity sale, PPGL has begun a store rationalisation programme to improve profitability. This includes the closure of non-performing stores and identification of locations for new, higher performing stores to retain scale.

The rationalisation programme involves considerable capital and execution risk, the company says in its notice of meeting, and the Board believes that the value to shareholders achieved through the proposed transaction is significantly greater than the value of forecast profits that may or may not be achieved.

Chairman Richard Punter said the Postie Plus Group should eventually be twice the size that it is today as a modern, exciting retailer well connected with customers in multiple retail channels.
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