Bendon merger with Pleasure State started with $A2m deposit

BUSINESSDESK: Bendon Group, which has the global distribution rights for Elle Macpherson Intimates and Stella McCartney underwear, put up $A2 million to kick off a 2011 merger with Australian rival Pleasure State in a deal that shrank millionaire Eric Watson’s stake in the company.

Bendon's Australian unit made the deposit on Pleasure State during the 12 months ended June 30, 2011, before acquiring its rival on August 12, according to the financial report lodged with the Australian Companies Register.

The full price paid has not been disclosed.

Mr Watson's Cullen group ceased to be Bendon’s sole shareholder in the merger last August and was replaced by Australian-domiciled JADR Holdings, the Companies Office says.

At the time, the deal was heralded as leaving Mr Watson with an unclear but "significant beneficial interest" in Bendon. Cullen bought the underwear maker in 2002 for $1.90 a share, valuing Bendon at $58.7 million.

Mr Watson also stepped back from having a role in its strategic direction as he and lieutenants Mark Flay and Don Stanaway stepped down from the merged companies' board.

They were replaced by Pleasure State founder and boss of the merged entity, Justin Davis-Rice,
and former Myer chairman Bill Wavish, who this year joined the board of Watson's New Zealand Warriors rugby league team.

Mr Davis-Rice set up Pleasure State in 2004 with ex-Bendon designer Kay Cohen.

In November, Bendon said it centralised finance, IT, supply chain, demand planning and corporate functions at its Auckland head office, while design and merchandising is handled out of Sydney.

Bendon has 18 retail stores in Australia and 34 across New Zealand, its website says.

Two months after the merger, Bendon snapped up three brands from ASX-listed Gazal at a discounted price that was not disclosed.

Neither the Pleasure State nor the Gazal acquisitions' fair value of assets and liabilities was prepared in time for the 2011 statements.

Bendon's Australian unit made a loss of almost $A27,000 in the 12 months ended June 30, 2011, compared to a profit of $A1.3 million in the 15 months ended June 30, 2010. The company changed its balance date after the merger.

Sales of $A34.5 million in the 2011 financial year compare to $A50 million reported in the prior 15-month period.

Still, the 2011 financial year's operating activities were cashflow positive, with $A2.1 million coming in the door, compared to an operational outflow of some $A163,000 in the prior 15-month period.

The Australian unit's gross assets were valued at $A15.2 million as at June 30 last year. At the end of the balance date, the Australian business employed 202 staff, out of a global workforce of some 600.

Bendon did not respond to BusinessDesk inquiries.