Woolworths sells Dick Smith to private equity firm Anchorage Capital for $20m

Anchorage will retain Dick Smith’s 325 stores across A/NZ and undertake “selective network expansion”

Woolworths has agreed to sell Dick Smith Electronics to turnaround private equity firm, Anchorage Capital Partners, for about $20 million.

The deal will close in November 2012. Woolworths will receive cash proceeds of $20 million in FY 2013 and a potential "upside” when Anchorage eventually exits the investment through a potential sale.

Anchorage plans to retain Dick Smith’s current network of 325 stores across Australia and New Zealand and will consider “selective network expansion” over time where appropriate, Anchorage said in a statement. The firm typically invests in business that are underperforming or are in need of operational change, then exiting them at later stage for a profit.

Woolworths had put the company up for sale earlier this year as it considered it non-core. The sale marks Woolworths’ exit from the specialty consumer electronics business from Australia and New Zealand.

Dick Smith, which was founded in 1968 by entrepreneur Dick Smith became part of the Woolworths group in 1980. It employs more than 4,500 people across 325 stores in Australia and New Zealand and in fiscal year 2012 reported sales of $1.6 billion.

Anchorage expects Dick Smith to emerge with a strong balance sheet with considerable asset backing and no core debt after the deal, Anchorage said in the statement.

“Anchorage is impressed with the underlying quality of the business and sees Dick Smith as an ideal fit for our investment mandate of acquiring established businesses with strong brands that can benefit from Anchorage's proprietary approach to operational performance improvement,” Anchorage chairman, Phillip Cave, said in the statement.

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