Warehouse buys out financial services JV partner Westpac for $7.3 mln
By Suze Metherell
Sept. 30 (BusinessDesk) - Warehouse Group, New Zealand's largest listed retailer, has taken control of its financial services joint venture, buying out partner Westpac Banking Corp's stake for $7.3 million.
The acquisition is the next step in the Auckland-based retailer's development of an in-house financial services business, and gives it control of a loan book of $57 million, which will be funded by a combination of equity proceeds from its 2014 capital raising and debt which it secured in partnership with Westpac, it said in a statement. Existing customers will still be able to pay their accounts through Westpac customer service channels.
Chief financial officer Mark Yeoman told BusinessDesk the total consideration for the purchase was $7.3 million, made up of $6.5 million plus the value of the venture's net assets.
The retailer's 2015 financial statements showed the unit's net assets were valued at $5.7 million as at Aug. 2, and Yeoman said the financial services division paid out last year's profit to the joint venture shareholders immediately prior to acquisition, "which reduced the net assets number."
Warehouse doesn't plan to expand its financial services through more acquisitions, and will instead build the business with a series of new products for its existing customer base, Yeoman said.
"The next step for us is to launch some products on the market that we've been designing," he said. "We want to run those before we consider looking at any other acquisitions."
The Warehouse Financial Services joint venture between the bank and retailer was formed in 2001 to provide retail financial services through Warehouse's nationwide chain. The ownership split was 51 percent to Westpac, and 49 percent to Warehouse.
Earlier this month, Warehouse reported adjusted profit, which excludes one-time items and is the basis for dividend payments, of $57.1 million in the 53 weeks ended August 2, from $60.7 million reported over the 52 weeks a year earlier. Sales rose 4.6 percent to $2.8 billion. Statutory net profit was $52.4 million.
The company's financial services business reported a loss of $1.8 million, widening from a year-earlier loss of $1.5 million, which it said was in line with expectations.
Warehouse shares fell 2.3 percent to $2.53 and have declined 17 percent since the start of the year.