Is Gerry hedging his bets?
By Kymberly Martin
Gerry Harvey is hedging his bets when it comes to making a bid for The Good Guys. He told AR he had not received an information memorandum and wondered if a family feud with The Good Guys might prevent any deal going through.
“The feud that goes back 20 years or more when I replaced Ian Muir as chairman of NARTA so maybe the family feud is continuing through the generations,” he said.
Harvey was not optimistic about his chances of getting The Good Guys describing them to AR as “not very good at all”. But he believes if JB Hi-Fi is making a pitch for the retailer there maybe there was an argument we could do it.
“ACCC chairman Rod Sims was reported saying that he could understand my thinking about going in this way and he will consider all offers,” he said.
As for what he would be prepared to pay he was circumspect.
“It comes down to what the company is making after tax. Anything above $700 million sounds fanciful, but I am only going on what has been reported in the media as to what the group makes, but those figures going around of $800 to $900 million don’t sound right to me. You have to look at the shareholder funds too.”
As to what means for the industry he suggested it could be good or bad. “In key global markets there are only one or two players left. In the UK the sector is dominated by Dixons, by Media Markt in Europe and Best Buy in the US. In New Zealand there is Harvey Norman and JB Hi-Fi. Here you have three big players operating, The Good Guys, JB Hi-Fi and Harvey Norman.
“A lot of people would argue you should have four or five, not one, two or three. The reality is that maybe that does not work anymore. That is way the market seems to be heading because as the years have progressed we have seen Clive Peeters, Clive Anthonys, Brashs and Retravision and others exiting the market. I have always thought that there is a far chance that Harvey Norman could be the last man standing or maybe with one other.” However, he said it was unlikely the market could support five or more players now.
Harvey was not sure if The Good Guys franchise situation which has seen some franchisees holding out for a greater share stalling any sale or IPO. And would he keep the franchise strategy?
“Maybe, maybe not. Initially we would not and if that worked it would be great. But if it didn’t work then would consider the franchise option.”