Interesting article on the AFR today - another one from Luminis...

Interesting article on the AFR today - another one from Luminis as part of the defence strategy. They've really hit the ground running.

Street Talk

Myer investigates dream deal to monetise online arm

Aug 10, 2021 – 9.34pm

Under siege retailer Myer and its bankers are testing the waters for an “OnlineCo” joint venture or spin-off, which in theory could see a new strategic or financial investor take a stake in its $600 million a year online retail business.

It is understood Myer and its bankers have approached a handful of potential backers, including Australian online retailers and private equity groups, to see whether they would be interested in working together on an online joint venture that would pit Myer’s brand and growing online sales with another’s strategic expertise and/or capital.

Australian group’s Temple & Webster, Kogan.com and Wesfarmers, which owns Catch Group, are the sorts of investors expected to be on Myer and its bankers’ hitlist, although similar deals offshore show it’s often private equity firms that express interest.

The incoming investor would be asked to buy a stake in the online joint venture, although could also end up holding equity at the Myer Holdings Ltd level. Creating the structure would be a big task - and it’s not the sort of thing that could be expected to happen quickly. They would also be a need to agree on valuation.

In terms of value, it would make sense to use other pure-play online retailers as a starting point. Temple & Webster, for example, was trading at 4.8-times trailing revenue, while Kogan.com was at 1.6-times, on Tuesday. Both were expected to grow revenue significantly in the 2021 financial year - 48 per cent at Kogan, 88 per cent at Temple & Webster - while Myer’s online sales were up 71 per cent in the six months to January 31. All recent growth numbers were pandemic assisted.

If you put a similar multiple on Myer’s business it’s easy to see how - in theory - there could be substantial value created for shareholders. Myer’s market capitalisation is only $382 million.

Of course, it is all just in theory and turning such pie in the sky-type scenarios would not be easy. There’s been similar deals offshore, including at US retailer Saks which raised $US500 million from the sale of a stake in its luxury ecommerce platform in March, but plenty more cases where bricks and mortar retailers haven’t been able to do it.

Myer. now advised by Luminis Partners, has also been talking about trying to monetise growth in its online and rewards businesses for years.

An OnlineCo joint venture is just one of a handful of potential strategies understood to have been tossed around inside Myer, at a time when the retailer and its board is under considerable pressure from its biggest shareholder, Solomon Lew’s Premier Investments. That pressure’s expected to come to a head in the coming two months, as Myer releases its FY21 results and heads to its annual general meeting.