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IPO off the table for Officeworks

IPO off the table for Officeworks

The office products retailer is set to remain in Wesfarmers' hands

Officeworks won’t go public any time soon, with parent company, Wesfarmers taking the prospect of an initial public offering (IPO) off the table for its subsidiary.

Publicly-listed retail and mining conglomerate, Wesfarmers (ASX:WES), announced on 15 February that it would undertake a strategic review of Officeworks. At the time, the company tabled a potential IPO for its office products retail business.

In early May, it was rumoured that the company was aiming to raise $1.1 billion by either selling or publicly floating its Officeworks business, which resells a vast range of products from vendors such as Apple, HP, Acer, Lenovo and more.

At the time, the retailer was expected to list with a market value of between $1.33 billion and $1.52, according to The Australian, with Wesfarmers set to float the Officeworks business through Macquarie, JPMorgan and UBS.

Now, Wesfarmers has confirmed that, not only has the prospect of an IPO been taken off the table, the company plans to hold onto its office products retailer for the foreseeable future.

“In light of current equity market conditions, Wesfarmers has determined that an IPO of Officeworks at this point in time would not realise appropriate value and would not be in the best interests of its shareholders," Wesfarmers told shareholders in a statement.

Since acquiring the business in 2007, Officeworks has more than doubled its earnings and improved its return on capital from 5.7 per cent in the 2009 financial year to 13.9 per cent in the first half of the 2017 financial year, according to Wesfarmers.

“Officeworks is well positioned for future growth with a strong, competitive market position and ongoing initiatives to grow its addressable market," the company said.

“Wesfarmers managing director, Richard Goyder, reiterated the group was comfortable retaining Officeworks in its portfolio and the business would be divested only if it was considered to be in the best interests of Wesfarmers’ shareholders,” it said.

The move to hold on to Officeworks comes as activity in the local office products retail market heats up, with private equity firm, Platinum Equity, moving to snap up both Office Depot’s local OfficeMax business, as well as Staples’ Australian and New Zealand operations.

Platinum Equity and Staples, both headquartered in the US, announced on 13 March that an acquisition deal they had struck would see Platinum Equity acquire Staples’ A/NZ for an undisclosed sum, with the transaction closing on 28 April.

“Following the transition to new ownership, the acquired business will continue to operate under the Staples brand in Australia and New Zealand for a short period of time while a new corporate brand is created,” the private equity firm stated upon the closure of the deal.

Meanwhile, in late April, Platinum Equity revealed it had reached a deal to acquire Office Depot’s OfficeMax business in A/NZ.

The private equity group’s latest deal remains subject to regulatory approval in each country, but is expected to close within the next “several months”.

“We look forward to working with the OfficeMax management team to continue improving the company’s offering, enhancing the customer experience and driving sustainable growth,” Platinum Equity principal, Adam Cooper, said at the time.

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Tags retailOfficeworksStaplesWesfarmersOfficeMaxPlatinum Equity

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