Blog: Olly WehringIndependent sale - cast out preconceived ideas?

Olly Wehring | 13 December 2006

The Independent Liquor sale is a story we have been following in detail since the offset, so it was great late last night when we got the call - from our source close to the matter - allowing us to be first to the line with news of a done deal.

That a private equity consortium has come out on top may surprise some industry followers. These companies, by their nature, cannot extract the synergies that drinks groups can from acquisitions so are often unwilling to enter into expensive bidding wars.

That, from what we understand, was not the case here. It looks like the battle to gain control of Independent got too rich for the likes of Lion Nathan and Diageo, whilst a consortium of Pacific Equity Partners and CCMP held its nerve.

The other assumption about private equity firms - again often wrong - is that they are in the game for the short-term gain, looking to quickly cut costs and boost value before placing the business once again on the market.

But one quote I read this morning from Grant Saligari, an analyst at Commonwealth Securities in Sydney, shed a different light on Independent’s immediate future. “Independent will generate good cash flow and the bidders can take a long-term view of the business,” he said. “Private equity have more flexibility in how they finance the business, and we can expect them to start loading Independent with debt.”


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