PROFESSIONAL EDITION

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ASB MAGAZINE: According to reports in The Australian Financial Review (AFR), SurfStitch’s parent company Alceon is eyeing a cash injection and is believed to be eager to package up its companies and find an equity investor. Alceon Group is believed to be looking at more retail acquisitions after outlaying more than $100 million over the past few years to emerge as one of Australia’s largest retail investors. Alceon Executive Director, Richard Facioni said that Alceon is also likely to explore an initial public offering for its online businesses EziBuy and SurfStitch.

We reported in April last year when  SurfStitch announced the completion of a Sale and Purchase Agreement between Alceon Group and SurfStitch Group Administrators.  The SurfStitch acquisition was undertaken through Alceon Retail Holdco Pty Ltd, Alceon’s wholly-owned investment vehicle that houses Alceon’s ecommerce retail operations, which also include EziBuy Limited. EziBuy is a New Zealand-based apparel and homewares retailer that was established 40 years ago and now ships almost 2 million orders per year across Australia and New Zealand. The combined group is reported to have total revenue of approximately $225m.

 

We also reported on the mechanics of the deal for our Professional Edition subscribers here https://asbmag.com/professional-edition-done-deal-surfstitch-sale/

Now the Sydney-based company is looking at half a dozen retail acquisitions worth between $5 million and $30 million each in segments including fashion, men’s wear and youth that it can bolt onto its existing investments – Noni B, Specialty Fashion Group’s Katies, Millers Autograph, Crossroads and Rivers chains, James Packer’s Pretty Girl group, discount variety retailer Cheap as Chips, in addition to EziBuy and SurfStitch.

Alceon’s retail investments now generate about $1.5 billion of sales from more than 1400 stores and account for about 75 per cent of invested capital.

Richard Facioni, executive director of Alceon Group and head of private equity investments is a former engineer who joined Alceon in 2014 after 15 years in mergers and acquisitions at Macquarie Group, sees scope to apply this so-far successful formula to recent acquisitions and new investments.

Talking  with AFR, Mr Facioni said he sees scope to at least double sales at SurfStitch and expects the business to return to profitability this year. Alceon has doubled capacity at SurfStitch’s distribution centre in Burleigh Heads and, since changes to the GST regime on July 1, has moved EziBuy’s fulfilment from New Zealand to the SurfStitch distribution centre.

“We can look at a business and say we can immediately give you an uplift in sales by accessing our customer base and taking costs out through shared services,” he said.

“All of a sudden it looks quite different in our hands than it does in the vendor’s hands – we are seeing those sorts of opportunities at the moment.”

Mr Facioni told AFR that Alceon is likely to explore an initial public offering for EziBuy and SurfStitch.

​”Those two businesses will stay together and probably IPO and we’ll look for more brands we can bolt onto that group,” Mr Facioni said. “There are growth opportunities in both those businesses.”

SurfStitch began from humble beginnings in a garage on Sydney’s Northern Beaches in 2008. In 2014, it made a spectacular debut on the ASX and less than a year later, the share price had more than doubled, pushing SurfStitch’s market value beyond $500 million.Through a series of ill-fated acquisitions, the company entered into voluntary administration in 2017 before it was acquired by Alceon/Ezi Buy in 2018.

We’ll have more information on this development next issue.