Kirkcaldie & Stains to make $19.35m initial return to shareholders

Kirkcaldie & Stains, the unprofitable Wellington-based department store owner, has said its first distribution to shareholders pending the sale of the business to Australia's David Jones would be about $19.35 million or $1.88 per share. The shares jumped to $2.20 from $1.68 before the announcement. The distribution amount was contained in a notice of special meeting of shareholders sent to the stock exchange this afternoon.

South African-owned David Jones, which runs an iconic chain of Australian department stores, will pay $A400,000 for the Kirkcaldie & Stains name and take over the lease of its store on Lambton Quay, Wellington, with the option to buy the retailer's assets for $NZ500,000 within 25 working days. The company's stock, valued at $8.3 million as at May 31, is not included in the sale and the company plans to sell any remaining stock from its Thorndon Quay furniture store.

Shareholders will be asked to vote on two resolutions at the special meeting on July 31. The first relates to the sale and the company ceasing to operate as a department store retail business after 152 years. If the resolution fails, the company said the board would likely continue to explore options for a sale, it said in the notice. If shareholders approve the sale, the only outstanding condition will be the buyer gaining the necessary consents, for which it has filed, from the Overseas Investment Office by November 30. The note says the board's legal advice and that of the lessor is that no consents are required but the buyer elected to be cautious and seek them anyway.

The second resolution relates to approving an early distribution of the surplus cash resulting from the sale of an inner-city building, the Harbour City Centre, adjacent to the Kirkcaldie main store. Because the amount equals the available subscribed capital of the company, it is deemed a major transaction under the Companies Act and requires a special resolution.

If the second resolution is passed, the company says matching the early distribution to the company's available subscribed capital means it can be received by shareholders tax-free. How it will be paid is still to be decided, with options including a pro rata buyback by the company, providing this doesn't trigger provisions of the Takeovers Code, or distribution through a court-approved scheme.

David Jones has indicated it will offer employment to most of the existing staff but Kirkcaldie & Stains estimates its redundancy payments will be up to $2 million.

A future distribution is expected when the company is liquidated and should also be tax-free. The board said the precise amount left over "is difficult to forecast." At least $2 million has to be held in escrow for a year pending any claim by the buyer under the agreement. While a formal liquidation is most likely, the board said other parties may express an interest in acquiring the company as a vehicle for a backdoor listing before then and that could be an opportunity for shareholders to realise more value.

(BusinessDesk)