44
Carpet Choice & Carpet Court Merger Proposal

Carpet Choice & Carpet Court Merger Proposal

  • Upload
    irish

  • View
    137

  • Download
    2

Embed Size (px)

DESCRIPTION

Carpet Choice & Carpet Court Merger Proposal. What do we want to achieve today?. Allow you to gain an understanding of why we are considering a merger Identify what matters, if any, remain to be resolved Vote on whether we should continue with the merger negotiations. - PowerPoint PPT Presentation

Citation preview

Page 1: Carpet Choice & Carpet Court Merger Proposal

Carpet Choice & Carpet CourtMerger Proposal

Page 2: Carpet Choice & Carpet Court Merger Proposal

What do we want to achieve today?

• Allow you to gain an understanding of why we are considering a merger

• Identify what matters, if any, remain to be resolved

• Vote on whether we should continue with the merger negotiations

Page 3: Carpet Choice & Carpet Court Merger Proposal

NEWFURN FLOOR COVERINGS LTDABN 63 004 650 668

22-24 Manningham Road West, Bulleen, Victoria 3105NON-BINDING BALLOT PAPERON PROPOSED MERGER WITH CARPET COURTPlease tick the appropriate box

Yes - Unconditional approval of the proposal Yes, subject to - conditional approval of the proposal

Conditions:________________________________________________________________________________________________________________________________________________________________

No – Reject the proposal

Page 4: Carpet Choice & Carpet Court Merger Proposal

How did we arrive at where we are today?

• Newfurn was established in 1959• Carpet Choice was formed in 1993 with just 17

stores• We split from furniture in 1995• We considered the takeover of Solomons in

1996• We expanded nationally and trebled our turnover• We attempted an outcome with Carpet One

Page 5: Carpet Choice & Carpet Court Merger Proposal

Where do we stand today?

• We have grown to become market leader

Page 6: Carpet Choice & Carpet Court Merger Proposal

Central Billings and No. of Members

0

20

40

60

80

100

120

140

160

93/9

494

/95

95/9

696

/97

97/9

898

/99

99/0

000

/01

01/0

202

/03

03/0

404

/05

05/0

606

/07

No. of members

0

20

40

60

80

100

120

140

160

CB $ million

member

CB $M

Page 7: Carpet Choice & Carpet Court Merger Proposal

Key Players Fiscal 2008 (E)

Carpet Choice 12.3%

Carpet Court 12.3%

ICR 4.5%

Others 45.3%

Carpet Call/Solomons 9.5%

Woolset 1.6%

Floorw orld 1.6%

Carpet Hotline 1.6%

Carpet One 2.2%

Anderson 2.3%

Trevors 2.7% Harvey Norman 4.1%

Page 8: Carpet Choice & Carpet Court Merger Proposal

Where do we stand today?

• We have grown to become market leader• Growth has slowed, and membership numbers

are static, but still 30 to 40 below our needs• We are the recognised leaders in our industry,

both at store and office level• We are strong and financially sound• Many members are nearing retirement age

Page 9: Carpet Choice & Carpet Court Merger Proposal

What challenges do we face in the future?

• Supplier dominance• Ageing membership base• Harvey Norman, Bunnings, Carpet Call• New entrants (LCP)

Page 10: Carpet Choice & Carpet Court Merger Proposal
Page 11: Carpet Choice & Carpet Court Merger Proposal

What challenges do we face in the future?

• Supplier dominance• Ageing membership base• Harvey Norman, Bunnings, Carpet Call• New entrants (LCP) • New retail formats• Imports• Shortage of sales staff and installers• What is the ideal model?

Page 12: Carpet Choice & Carpet Court Merger Proposal
Page 13: Carpet Choice & Carpet Court Merger Proposal

What questions have members raised?

• Making my competition better• Losing my point of difference (branding and marketing)• Impact on product profiles• Cost to members• Distraction of Central Office• Membership Agreements• Dual membership• A worse deal from our suppliers• Is there a financial risk?• Losing control of our destiny• Who has the final say about the merger?

Page 14: Carpet Choice & Carpet Court Merger Proposal

What are the views of Phil Ruthven?

• Phil Ruthven, Chairman of IBISworld, has been a long and respected commentator on business success, retailing and cooperatives

• DVD

Page 15: Carpet Choice & Carpet Court Merger Proposal

How did this dialogue with Court begin?

• Occasional discussion at Management and Board level for some years

• Last year, a joint committee was formed to more seriously explore the possibilities

• Confidentiality Agreements were signed by all Directors and Management of both groups

• We jointly appointed a business and strategic advisor which has provided the foundation for this presentation

Page 16: Carpet Choice & Carpet Court Merger Proposal

Why would we want to do this?

Two main reasons…

1. To strengthen our members’ position in both the short and long term at the expense of the rest of the competition

2. To position the group to deal with future strategic opportunities and threats, to ensure our longevity

Page 17: Carpet Choice & Carpet Court Merger Proposal

What Strategic Opportunities exist?

They fall into two categories…

1. Flooring related – grow and improve network, dominant market share, critical mass (inc marketing), possible new tiers, consider new formats, importing, logistical support structures

2. Non Flooring related – absorb other groups, property development, enter new business or retail markets - diversification

Page 18: Carpet Choice & Carpet Court Merger Proposal

What’s in it for Members?

• Better buying prices• Better product profiles• Better margins and profitability• Better goodwill when you sell your business• Better service from a better resourced central

office• Better lifestyle and a greater sense of success

from being part of the biggest and best

Page 19: Carpet Choice & Carpet Court Merger Proposal

What’s in it for the Group?

• Around 25% market share giving us strength in numbers• Lower central office costs per member• Improve the Balance Sheet• Easy entry into warehousing, if it is a benefit• Savings and efficiencies in media buying• Enhance services across all areas• Meet competitive challenges and metro expansion• More funds to expand and dominate in our market• Funds to pursue strategic objectives• Attract the best

Page 20: Carpet Choice & Carpet Court Merger Proposal

What would it cost me as a Member?

• This will depend on what we agree to in respect to capital structures.

• All costs of undertaking the merger will be absorbed into group operating costs

Page 21: Carpet Choice & Carpet Court Merger Proposal

What would it cost the Group?

• So far it has cost Choice approximately $60,000• Costs are being split 50/50• Estimated costs if we proceed are another

$200,000 approximately for us, a little more for Carpet Court

Page 22: Carpet Choice & Carpet Court Merger Proposal

How do the two Groups compare?

• Choice has a Business Development Team, offering training and retail support, whereas Court doesn’t

• Court has warehouses and staff to support and man them, Choice doesn’t

• Court imports, Choice doesn’t• Choice is very disciplined on store presentation,

Court isn't• Staff structures are different and reflect above

Page 23: Carpet Choice & Carpet Court Merger Proposal

How do the two Groups compare?

Aspect Choice CourtCentral Office One in Melbourne – no

warehouseNational office and warehouse in Melbourne

Office and IPL in Sydney

Warehouse in Perth

Directors 7 elected from membership, one independent

7 elected from membership, one independent

Offices Leased Owned (Melbourne)

Leased (Sydney)

CO Staff 23 inc part timers 26+ inc part timers

Page 24: Carpet Choice & Carpet Court Merger Proposal

How do the two Groups compare?

Aspect Choice CourtRetail Sales $270 million $270 million

Net Assets approx.

Paid Up Capital

$2.5 million

$484,000

$8.0 million

$6.2 million

Number of stores

• Choice

• Court

• Homeflair/unidentified

139

1

181

33

Number of Members 121 180

Page 25: Carpet Choice & Carpet Court Merger Proposal

How do the two Groups compare?

Balance Sheet Item Choice Court

Current Assets $16,200,000 $21,000,000

Non Current Assets $900,000 $2,900,000

Total Assets $17,100,000 $23,900,000

Current Liabilities $14,000,000 $15,800,000

Non Current Liabilities $600,000 $100,000

Less Total Liabilities $14,600,000 $15,900,000

= Equity•Issued Capital•Retained Profits and Reserves

$2,500,000

$500,000

$2,000,000

$8,000,000

$6,200,000

$1,800,000

Page 26: Carpet Choice & Carpet Court Merger Proposal

How would the merger be achieved?

• Most likely, a Scheme of Arrangement (SoA) will be used• A SoA is a friendly means of merging two companies• Most likely a new company would be set up, which will

then absorb both businesses• A Scheme Booklet would be sent to all members

detailing elements of merger• ASIC and the Federal Court must approve the SoA• Members are then asked to vote (75% must approve)• Federal Court then grants final approval

Page 27: Carpet Choice & Carpet Court Merger Proposal

Current Structure

Carpet Choice

Carpet Choice Store Owners Carpet Court Store Owners

Ow

n 10

0%

Ow

n 10

0%

Page 28: Carpet Choice & Carpet Court Merger Proposal

Proposed Structure

New company operatesCarpet Choice and Carpet CourtEqual Directors representation

Carpet Choice Store Owners

Carpet Court Store Owners

Join

tly o

wn Jointly ow

n

Page 29: Carpet Choice & Carpet Court Merger Proposal

Would there be equal shareholdings?

• Pre-merger there are different shareholdings• Does this matter?• Should the new group have Ordinary Shares

and Preference Shares, to equalise Ordinary Shares?

• One member – one vote?

Page 30: Carpet Choice & Carpet Court Merger Proposal

How would a new Group be governed?

• Members will control (one member, one vote)…– Election of Directors– Increases in Capital– Major Acquisitions– Changes to the Constitution (75% required)

• Directors will control…– Governance of the group via management– Strategies– Borrowings, profit distributions

Page 31: Carpet Choice & Carpet Court Merger Proposal

Who would make up the Board of Directors?

• In the transition phase (around two years)…– 4 Directors representing Carpet Choice– 4 Directors representing Carpet Court– Three independent, non executive Directors, one of

which would be Chairman

• In the longer term, it is recommended that the Board be reduced in numbers, but there be no less Independent Directors

Page 32: Carpet Choice & Carpet Court Merger Proposal

Who would manage the Group?

• Choice has one GM, whereas Court has two, but they have specialist responsibilities

• We don’t have similar structures• The Steering Committee will make the necessary

decisions on the staff structure prior to the final member vote

• The central (head) office will be Melbourne based, and most likely a new site

• Some positions are obvious, others less so• We envisage our senior managers will be part of the new

group

Page 33: Carpet Choice & Carpet Court Merger Proposal

Would both brands continue?

• The simple answer is YES, and both should be grown to their optimal store network

• Marketing and merchandising will remain as different as it is today

• We expect both brands will remain culturally apart, and mostly likely stay separate for meetings and trips

Page 34: Carpet Choice & Carpet Court Merger Proposal

How would suppliers feel about this?

• Who gives a damn!• It is our job to look after the end consumer and keep

them happy• It is the suppliers’ job to look after us and keep us happy

– to supply the product we need, on time, at a fair price• Suppliers should only expect support for support• Suppliers will respect a dominant group – they could not

afford to lose us• It is in their interests for us to elevate the standards of

the industry

Page 35: Carpet Choice & Carpet Court Merger Proposal

What would happen to the product profile?

• The big advantage is that we should have more shared exclusives that are only available to the new group

• Some obvious product rationalisation should result in lower prices and higher margin

• The bigger the volume a group offers, the better placed it is to negotiate prices

• We will be better placed to consider exclusive imports• We may be better placed to secure exclusive brands

Page 36: Carpet Choice & Carpet Court Merger Proposal

Would existing trading terms continue?

• Definitely YES, and maybe better• If both groups have strengths and weaknesses

in their rebate structures from suppliers, we should be able to have the best of both worlds

• Trading terms and fees are not consistent, and don’t need to be. The main variation may be in advertising levies

• A review will take place to identify to what extent they can be improved

Page 37: Carpet Choice & Carpet Court Merger Proposal

Would I lose any independence?

• The simple answer is NO• You retain your rights as a member• You will still have the final say in running your

business, the products you choose, the prices you sell them for and so on

Page 38: Carpet Choice & Carpet Court Merger Proposal

What are the timelines?

Event 04/08 05/08 06/08 07/08 08/08 09/08

Steering Committee Meetings X X X X

Finalise Structure X X X

Due Diligence X X

Meet with Members X X X

Issue necessary documents X

Federal Court Hearing X

Member votes, then second hearing X

Completion X

Page 39: Carpet Choice & Carpet Court Merger Proposal

What matters are still to be resolved?

• Merger Process• Capital Structure• Organisational Structure• Central Office Location• Warehousing and Importing (will be reviewed in

time)• Strategic Objectives (after merger)

Page 40: Carpet Choice & Carpet Court Merger Proposal

Is there a Plan B?

• Do we really need to merge?• Acts as a catalyst for change• If this does not proceed, what will Carpet Court

do?• If this does not proceed, we must not stand still• Store network will become first priority, but we

will need to consider all the future options

Page 41: Carpet Choice & Carpet Court Merger Proposal

What do I need to do?

• Give us your feedback and complete the

non-binding vote today• Carry on with business as usual • Continue to trade as Carpet Choice, but look

forward to new opportunities• Be prepared to give your final vote in around

three months

Page 42: Carpet Choice & Carpet Court Merger Proposal

Do you have any questions about theCarpet Choice & Carpet Court

Merger Proposal?

Page 43: Carpet Choice & Carpet Court Merger Proposal

Should we continue with the negotiations?We now need to take aNon – Binding VOTE

Page 44: Carpet Choice & Carpet Court Merger Proposal

Thank you for your attendance and input