DIC and Apparel to amalgamate

Press, 4 December 1985, Page 42

DIC and Apparel to amalgamate

By

Simon Louisson,

in Wellington

DIC Stores, Ltd, and Apparel Holdings have announced merger plans which will form the third largest retail company in New Zealand. The merger will be effected by DIC acquiring all Apparel shares through issuing six DIC shares for every five Apparel shares. DIC shares were trading at 140 c and Apparel at 160 c at the close of trading on Monday. In a joint statement the companies said that although DIC is being used as the vehicle, the company will ultimately be listed as Apparel Holdings, Ltd. The merger is a financial amalgamation and DIC will trade as one division as already occurs within the Apparel structure with its other divisions. Based on latest annual results the new company will have shareholders’ funds of close to $4O million, assets of $7O million and turnover of more than $l3O million. ' The DIC chairman, Sir John Mowbray, and Apparel’s chairman, Mr Peter Jackson, say the companies will complement each other well, and the merger has the support of both boards. DIC is 55 per cent owned by Brierley Investments, and Apparel is 56 per cent owned by its executive directors. Subject to acceptance of the offer BIL will be allocated an additional 5 per cent of the merged company in return for transferring its 17 per cent holding in James Smiths, Ltd. The James Smiths investment has been built up over a period of several years and

is seen by DIC as a financial investment in Wellington in place of the store it sold last year. The end result will be that the Apparel directors and BIL will have around 30 per cent each in the merged company. Composition of the board has not been finalised but it will be chaired by Mr Peter Jackson and will probably have two BIL representatives, including the former chief executive of DIC, Mr Graeme Hitch. Balance sheet analysis for 1985 shows that DlC’s profit for the 10 months to June 30 was $1.7 million on turnover of $72.3 million, while Apparel achieved a $1.9 million profit on turnover of $35 million for the year to January 31. Mr Jackson says Apparel will bring retail and manufacturing management strength while BIL will bring decision-making strength, and DIC has considerable assets and wellplaced stores. “To understand this merger from our point of view you have to look at our board. We have six executive directors with four on the retailing side and two on manufacturing. That’s our strength. “Although Apparel has grown rapidly, it does not have the published trackrecord.” He sees the new company moving toward specialised retail stores in the middle to upper end of the market where he says there is currently a void. Mr Jackson does not see any incompatibility between the type of stores DIC runs

and the Carters, Wharehouse, and George Harrison operations of AppareL The DlC’s refurbished New Era stores in Hamilton, Rotorua and Takapuna fit in well with his aims. Mr Jackson confirmed that the companies have had discussions with James Smiths but the family controlled company had no immediate desire to be included in the merged company. From the DJ.C.’s point of view the merger is a perfect synergy in the finance and administration areas, says Mr Hitch. “Thd DIC has assets. But there is a declining consumer economy. It needs to rack up its profit and a quick way of doing that is by acquiring a more profitable business. Apparel is a new company which needs assets. It’s a perfect mix.” Mr Hitch, who was appointed by Buntings (now part of BIL) to turn DlC’s poor performance around, says the merger is part of his turnaround plan. He considers it a “reasonable success” to have turned the losses to profits and now achieved the, merger in thrqe years. DIC has a big computer and its own credit card operation which could be used in the expanded company. Formal takeover documents will be sent to all Apparel shareholders before the end of the year and the DIC will hold an extraordinary meeting in midJanuary to approve the necessary increase in capital. The offer will close at the end of February.