The Australian electronics retailer, Dick Smith, was sold by its parent company, Woolworths, to private equity group, Anchorage Capital Partners, it was announced today.
The ABC reports that Woolworths is receiving $20 million for the sale, which will see Anchorage take over Dick Smith's 325 stores around Australia that employ more than 4,500 people. The deal is expected to be completed later this year.
Anchorage has said that it intends to maintain the current stores and selectively expand others, but the head of Morningstar equities, Peter Warned, told the ABC that he is doubtful that all the stores will remain open in the longer term.
"It's all very well to be upbeat about something you've just bought, but you have to be realistic and they've got 4,500 employees and 325 stores – that takes a lot of profit to support, and the space is very competitive," he told the ABC.
"[Anchorage] certainly weren't going to pay a big dollar for it because it is going to be a reasonably difficult turnaround for it given the pressures on margins and deflation in the space and the continued frugality of consumers at this present point in time," he said.
"You know, consumer electronics is not the boom segment it was four or five years ago."
The sale of Dick Smith does not come as a surprise as Woolworths has previously expressed its intention to sell the electronics retailer. Dick Smith withdrew its presence from the video game sector earlier this year when it held massive sales around the country. A Woolworths spokesperson told the Australian Financial Review at the time that "this isn't about clearing out to restock again. There are games stores and online gaming specialists, so we'll leave that market largely to them and just have a very core range of titles and much tighter purchasing strategies."
Dick Smith will be run by Nick Abboud, who was previously a senior executive at Australian department store, Myer.