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Amazon threat sinks $1.5bn Officeworks IPO

Wednesday, 17 May 2017
By Print21

Wesfarmers has abandoned a plan to float its Officeworks retail chain, citing the poor climate for IPOs as the local retail market prepares for the Australian launch of US online retail giant Amazon.

Bankers had valued the office supplies, stationery and technology retailer at between $A1 billion and $A1.5 billion.

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, the company said in a statement to the ASX.

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.

“Retail IPOs have been caught in the crosshairs of medium-term concerns about Amazon but also soft short-term consumer data, which has led to a broad-based derating of the whole consumer sector,” Yarra Capital portfolio manager Katie Hudson told The Australian Financial Review.

“Officeworks is the most vulnerable to the intrusion of Amazon, because a large percentage of its products are consumables with no brand loyalty,” retail consultant Barry Urquhart of Marketing Focus told news.com.au.

He said a large number of Officeworks customers were small business owners who prized convenience and accessibility, meaning that Amazon’s approach to delivery and service would leave Officeworks exposed.

Amazon is currently looking for a warehouse – with floor space of up to 93,000 square metres – to become its first Australian ‘fulfilment centre.’ The location is likely to be in Brisbane, Sydney or Melbourne.

 

 

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