Cash-strapped electrical goods retail group, Betta Stores Limited (BSL), has been put up for sale after running into financial difficulties.
BSL manages the brands and buying power for such retail outlets as Betta Electrical, Chandlers and Truscotts. The stores sell a range of electrical goods ranging from whitegoods to home theatre systems, plasma screens and DVD players, digital cameras and gaming consoles.
The Commonwealth Bank, owed $16 million by the NSX-listed company, appointed PricewaterhouseCoopers partners, Phil Carter and David McEvoy, as receivers earlier this month.
Up for sale is BSL's franchise business, which manages the branding and buying for some 200 franchisee stores, as well as three company-owned stores in Carnegie (Melbourne), Rothwell (Brisbane) and Berrimah (Darwin).
PwC's Carter has already received several offers from trade buyers, competing buying groups and private investors. "Considering the level of interest so far, we would expect the sales to conclude within the next couple of weeks," he said.
BSL ran into financial trouble after its management embarked on an ambitious spending spree to develop flagship superstores to compete with rivals such as Harvey Norman, Retravision, Bing Lee and Clive Anthony's.
"The company had at one stage figured that seeing as most of their franchisees lacked the capital to build superstores, perhaps they would be in a better position to do it," Carter said.
BSL owned and operate five 'Betta' and 'Chandlers' stores in Victoria, four in Queensland and one in NT, and eight 'Truscotts' stores in SA.
The move backfired - accountable for $2.6 million of losses in the 2005 fiscal year, and a whopping $10.33 million in the following 12 months.
The BSL board moved to correct the strategy in February of this year, selling three stores in Queensland and a further three in Victoria, and closing one other store.
The company-owned stores, Carter said, had "absorbed too much management time" and turned into loss centres. Now only three remaining Betta superstores, as well as the eight Truscotts stores remain on the books.
The franchise business, on the other hand, appears to still be trading profitably.
BSL as a whole reported a 43.8 per cent increase in sales (to $356.99 million) and a loss of just over $6 million in the year to June 2006.
"It's no secret that the more profitable part of the business is the franchise network," Carter said.
BSL owes in excess of $40 million to both the Commonwealth bank and trade suppliers, and as of its last financial statement was down to its last $3 million in cash reserves.
Carter said the receivers are entertaining offers for the business as a whole, but are also taking bids on parts of the business.
The Truscotts stores, for example, were already listed for sale before receivers were appointed and will most probably be sold separately. "Potential buyers [for Truscotts] had already been identified," Carter said. "I expect the Truscotts business will be sold pretty quickly."
He also expects the majority of the group's 140 franchisee owners (representing some 200 stores) will "show loyalty" to the Betta brand and not jump ship in the wake of the company's trading difficulties. Only "a couple" have distanced themselves from the brand since administrators were appointed, he said.
"Yes, they always have the option [to jump ship], should their agreements be expired," Carter said. "But the best outcome for the franchisees is a good, quick sale."