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Private equity firms circle The Reject Shop: sources
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The Reject Shop is in the crosshairs of private equity.
Financial sponsors are said to be crunching the numbers on a potential tilt for discount retailer The Reject Shop.
As first reported by Street Talk, among firms that are assessing the merits of a bid is turnaround group Allegro. While this column is not suggesting an approach to the $220 million ASX listed company has been made, several private equity firms are said to be seeing if a deal stacks up.
The Reject Shop's shares are up about 36 per cent this year and are changing hands at $7.61. This is, however, well off the stock's eight year highs of $18.60 making the company a much easier target than it may have been in 2010.
A spokesman for the retailer declined to comment on Wednesday and said the company had "no update to provide to the market on this matter." An Allegro spokesman did not respond by the time of publication.
The Reject Shop listed on the ASX in mid-2004, after a Macquarie private equity fund sold its majority holding. The company may have attracted private equity as it has the size and buying power to be able to outdo the plethora of $2 shops run by small business operators in shopping strips that sell a jumble of cheap goods and trinkets using a high-volume and low-margin model.
But The Reject Shop has in recent years been
buffeted by the big discount department store chains such as
Kmart and Big W as they increasingly shift a portion of their offerings down to the lower end of the spectrum with their own low-priced general merchandises.
The company
last year endured a rough time when its over-stocked its shelves with "variety" products and many proved unpopular with consumers.
At its interim results in February the company said net profit edged up 1.1 per cent to $17.7 million.
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