How long do you think Thomson has to dispose of Premier Retail Networks (PRN) before its value edges closer to zero? There’s a rumour in the US that Walmart is close to finally distancing themselves from PRN (we think the rumour is slightly off kilter as it doesn’t take into account how Walmart does business – Walmart won’t fire anyone; just change the T’s & C’s so its not viable to do business with them anymore).
We have heard however that the PRN / Walmart relationship is about as friendly as that between North and South Korea at the moment.
Whatever amount PRN finally sells for, one thing is for sure, it will be far less than the purchase price and Thomson will take a major haircut on the deal!
When you think that Thomson bought PRN for USD 285 million and some debt (we heard that the ‘real’ number with the debt and obligations was actually in the range of USD 320-335 million); any price – and we hear numbers being bandied about anywhere between USD 10 million and 120 million Thomson will have ended up losing a huge chunk of cash.
PRN show something like USD 80 million in sales (pretty much all Walmart) and USD 8 million in free cash flow. If you get a dumb buyer in Private Equity and they value it at 15x, you might end up being able to sell for USD 120 million (if the buyer doesn’t do proper due diligence of course).
Mind you if a prospective buyer does due dilligence and understands that the USD 80 million could be cut by 50-75% by Walmart direct sellling to the biggest accounts themselves, all of a sudden, the business is in the red and you have negative value!
It’s our understanding that Goldman Sachs is still handling the sell.