Gunns Limited announced that it has entered into an agreement to sell its Hardware Retail business to Blue Mountains Hardware Pty Ltd, a wholly owned subsidiary of John Danks & Son Pty Ltd (Danks), for an amount of $40 million subject to completion adjustments. The sale is a conclusion to a competitive bid process which evaluated offers from various parties. The transaction involves the sale of the entire Gunns Hardware Retail business in Tasmania and the transfer of all its employees. The sale is expected to complete on May 31, 2010.
(Andrew Main, The Australian: Not so great Gunns …)
IF Gunns Ltd was a start-up company, the analysts wouldn’t be looking at it.
Yesterday’s $40 million deal with the Lowe’s-Woolies-owned hardware outfit Danks & Son is clearly a constructive development for the buyer and particularly for the 283 affected employees but the vendor’s market capitalisation is now around the $285m level. Shares in what was once Australia’s all-powerful timber giant closed unchanged at 35c yesterday as market watchers mostly changed the subject when the topic of Gunns came up.
It’s hardly surprising since the planned $2 billion Tamar River pulp mill is now disappearing over the horizon of the timber group’s plans, thanks to the enormous and unfashionable leverage that would now be required to finance it. News from the bunker is sparse and most reports on the company highlight litigation funder IMF’s class action, managed by Maurice Blackburn Cashman, alleging Gunns breached its continuous disclosure obligations earlier this year.
Gunns reported a 98.7 per cent profit drop in the half year to December 31, 2009, and the class action alleges the company failed to make the market aware of its deteriorating financial position.
To give you an idea of how well the company is travelling, that news in February knocked the share price down by 22 per cent from 88c to what seemed like a low 68c. Now it’s just over half that.