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Australias Officeworks Eyes $1.5B IPO Or Might Be Up For Sale
By Andy Braithwaite.
Melbourne, Australia, Australian conglomerate Wesfarmers has said it is looking to divest its Officeworks office supplies business via a sale or by taking the company public.Australian conglomerate Wesfarmers has said it is looking to divest its Officeworks office supplies business via a sale or by taking the company public.
Wesfarmers acquired Officeworks in 2007 as part of the A$21 billion ($16 billion) Coles Group deal, and the office products retailer has been evolving successfully under the leadership of Managing Director Mark Ward, growing sales, profits and margins, and developing a strong multichannel offering.
Now Wesfarmers is looking to cash in on Officeworks’ success. “In light of its performance, options to monetise the value created for shareholders, including via an initial public offering, are being evaluated,” the group said in its H1 earnings press release.
No valuation has been put on Officeworks, but OPI estimates that the business could be worth more than A$1 billion based on recent EBITDA figures.
Speaking on Wesfarmers’ earnings conference call, the group’s Managing Director Richard Goyder said Officeworks was “a really discrete business” and could easily be separated. However, he added that Wesfarmers was just looking at its options and had decided to make this strategic review public – if it’s not able to achieve the required shareholder returns then it will “happily leave [Officeworks] in the stable”.
He denied that the timing of this strategic review of Officeworks was linked to the entry of Amazon into the Australian market, stating that Officeworks was “quite different” from Amazon and that it already had a significant online business.
It’s interesting that the three biggest pure-play office and business supplies reseller companies in Australia – Staples, OfficeMax and Officeworks – are all up for sale. Could that lead to these businesses merging in some way?
While the Australian competition authorities have already given the green light to a Staples/OfficeMax combination as part of Staples’ attempt last year to acquire Office Depot, it might make more sense to combine Officeworks with either Staples or ‘Max. Officeworks caters to the small business customer, Staples and OfficeMax more to corporate and public sector clients, so – on the surface at least – that would create an entity serving businesses of all sizes and there would no doubt be some significant synergies to be achieved.
It would also make sense in terms of branding: Officeworks is very much an Australian brand with strong local brand equity, so renaming Staples or OfficeMax in Australia as, for example, Officeworks Corporate Solutions, would probably be a smart move.
This is obviously just speculation at this stage – Officeworks’ achievements have been built on providing solutions for the small business customer with the store at the heart of the customer experience; it is not easy at the moment to find a business supplies reseller that has been able to profitably combine retailing, catalogue/online delivery and enterprise/public sector solutions. Anyone looking to try and do that with Officeworks would therefore need to proceed with caution.
Turning to Officeworks’ results for the six months to the end of December 2016, it was another solid performance with sales growing 5.9% year on year to A$927 million and EBITDA up 5.7% to A$74 million.
“The results were very pleasing,” said Ward, adding that growth had been achieved in stores, online and in the B2B segment.
New merchandising layouts have been implemented in stores and this has led to new or expanded ranges of art supplies, teaching aids and retail supplies, said Ward, which delivered “positive results”.
Four new stores opened during the period, taking the number of Officeworks stores to 163.
https://www.opi.net/business/large-resellers/wesfarmers-puts-officeworks-up-for-sale/
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