This was my post after they announced their foray into home...

This was my post after they announced their foray into home appliances, and nothing has happened yet to change my view:


"For what it worth, these are my thoughts/concerns?

1) In general terms MCP are venturing into a whole new ball park in terms of product range and associated outlets. To date, their range has largely been at the cheaper end of FMCG's, marketed through supermarkets, etc. True, they sell some items through dept. stores (such as cutlery sets, etc) but again, these products are typically at the lower end of the price range of same.

2) The product range of Home Appliances islarge electrical appliances. These products are marketed through an entirely different distribution/reseller chain, to which MCP will have had little, if any, exposure or experience.

3) The advised purchase price of 4.9x 2012 EBITDA is, IMHO, hardly a "bargain". Rather a price of closer to about 3.5X would be more reasonable in todays market. After all, the long term PE of MCP is only around 7X.

All too often the Board of these smaller companies jump into acquisition's for all the wrong reasons:
1) They have minimal experience in the business of the buyout target
2) They feel they must be seen to be doing something to expand/grow the existing business
3) Blindly follow the advice of their "expert" outside consultants/advisers. (who really couldn't give the proverbial provided they get their fees)

How may others have seen similar ventures into unfamiliar territory go horribly awry?? In my case I can think of Hills diversification that has cost them (and me!!) a mint.

I wish the Board well, but I am going to reduce my holding by 75% until future results justify the purchase. "