ACC-backed Allegro sees Carpet Court as potential listing opportunity

Allegro Funds, the Australian private equity firm that counts the Accident Compensation Corp's investment arm as an investor, is optimistic its latest New Zealand investment, Carpet Court, is a candidate for potential listing once the flooring retailer has been whipped into shape.

The Sydney-based firm bought New Zealand's Carpet Court in July in a deal to recapitalise the firm and leave it debt-free after the transaction. Allegro co-founder Chester Moynihan told BusinessDesk the company has about 25% of the New Zealand market, which is highly fragmented, with a number of small, family-owned operators. Allegro typically targets companies it sees as "capable of transformation" that can be realised over three to five years through a trade sale or initial public offering.

"Carpet Court is a real opportunity to improve the business, to invest in the business, and to drive growth both organically and also through bolt-on acquisitions," Mr Moynihan said. "What we want to do in the investment timeframe is improve operations and grow to the point where it's ready for a float. We like the fact it's the market leader."

The investment is the third by Allegro's second fund, which closed with $A180 million in June, including a commitment from ACC.

Carpet Court sells a variety of flooring products across 60 outlets nationwide, employing more than 400 staff, and is led by veteran retail executive Rob Smith.

The flooring firm is in a sweet spot at the moment as the country's house building boom drives up demand for household goods, with retail spending on furniture, floor coverings, houseware and textiles at a record $2.14 billion in the year ended March 31.

Mr Moynihan said consumers take a much more considered approach in making carpet purchases than many other retail transactions and typically want a more tactile experience when choosing their carpet.

Carpet Court is Allegro's second investment in New Zealand following the firm's recent sale of three assets – Cowley Services and Trilogy Building Services, and Spectrum Fire & Security in Australia – to France's GDF Suez. It owns 87.5% of Carpet Court, with the remaining 12.5% held by interests associated with director Stefan Preston, who helped turn around the fortunes of lingerie maker Bendon.

Mr Moynihan sees New Zealand as an attractive investment destination, citing the strong leadership of Prime Minister John Key and his deputy and Finance Minister Bill English.

"They're sensible leaders who have the economy's well-being at their heart," he said. "It's not a small factor in us being comfortable to commit to this investment."

(BusinessDesk)