takeover talks

http://www.theage.com.au/business/rag-trader-stretched-at-the-seams-20110610-1fwy8.html

The vultures are circling Pacific Brands as rising costs and falling sales bite.

IN FEBRUARY 2009, Pacific Brands made a bold move to shut Australian factories and become a designer of branded goods made in Asia, but it is becoming increasingly evident that plan has not paid off. As a result, the rag trader, and custodian of some of the country's best-known brands - from Bonds and Malvern Star to Australia's iconic tennis shoe, the Dunlop Volley - is trapped in a squeeze between soaring Chinese costs and failing retail demand.

Pacific Brands has since shed 2000 local jobs, but that has failed to turn the company around. The share price has slumped, and the value of some of its brands has been slashed.

Bonds' stranglehold on the youth end of the market is being challenged by new fashion groups, led by Spanish company Inditex, which has launched the Zara chain in Australia.
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Times have rarely been as tough on the showroom floor. Major retailers are complaining that shoppers are on strike and are unwilling to pay full price for anything. Some of the country's biggest retailers, such as Myer, have gone to factories in China to produce cheaper house-brand merchandise.

All this has put PacBrands in a parlous position.

With the smell of blood in the water, three private equity groups have already run the ruler over Pacific Brands, BusinessDay has learnt. Those private equity firms are unlikely to move on Pacific Brands as long as its share price, which has fallen from about $1.10 in February to trade under 70? this week, remains above 60?.

Also in the mix are trade buyers, including a South African retail group, which already has an Australian presence and a sophisticated Asian supply chain, and retail kingpin Solomon Lew.

Pacific Brands chief executive Sue Morphet (pictured right) says she's unaware of any interest. ''I wouldn't have any idea whether there's tyre-kicking going on for our group at all,'' Morphet told BusinessDay.

She points out that Pacific Brand has already sold or closed down brands that weren't pulling their weight. ''There's always rumours - when we were 12? [a share, in early 2009], there were rumours, too.''.....