Smiths City, a furniture and electronics retailer, has been placed into receivership to allow a quick sale to Polar Capital, a private investment company.
Photo: Google Maps
The sale needed only shareholder approval, but the Board opted for receivership to avoid a time consuming vote.
In a letter to shareholders the Board apologised for its course of action but justified its decision.
"Further delay risked jeopardising the completion of the sale and a reduction in the amount
available to secured and unsecured creditors. The business cannot function without the
confidence of suppliers and customers."
"The Board considered an insolvency process was inevitable. If shareholders rejected the
transaction, the Board would have requested that receivers be appointed as the financial
position of the company was not sustainable.
"In the knowledge that shareholder value was gone, the Board's duty became to preserve as much value as possible for creditors. The appointment of receivers today was necessary to fulfil that duty."
Details of the $60 million deal were released earlier this week, and included the closure of seven stores and job losses for just over 100 staff.
Polar Capital is owned by Colin Neal, the founder of the refrigerated logistics company, Big Chill.
Smiths City signalled in March the Covid-19 pandemic was having a significant impact on the business, and in its letter today reiterated the impact had been "catastrophic".
Board chairperson Alastair Kerr said the situation had been challenging.
"Compounded by unprecedented circumstances ... we sincerely regret that directors have had to take this action. However, while this outcome is extremely disappointing for both the Board and shareholders, we have been able to take steps to protect Smiths City's legacy and the hundreds of jobs that will transition to the new business.
"The Board will now work to ensure an orderly transition of Smiths City Group to the receivers."
Colin Gower and Diana Matchett of BDO Christchurch and Andrew Bethell of BDO Auckland have been appointed as the joint receivers and managers. Immediately on appointment the receivers waived the remaining condition and settled the sale.
Stores will trade as usual, and the ones marked for closure will wind down in the coming weeks.
Those stores are: Mount Wellington, Porirua, Lower Hutt, Kapiti, Whangārei, the Invercargill clearance centre and the Christchurch outlet store.