Veteran corporate raider isn't losing his touch

Veteran corporate raider Sir Ron Brierley has lifted his stake in Kirkcaldie & Stains [NZX: KRK] for the third time since Australia's David Jones announced plans to take over the unprofitable Wellington department store.

Brierley increased his holding in Kirkcaldie to 9.4% from 8.4% via his ASX-listed investment vehicle Mercantile Investment Co, buying 106,000 shares for a total of $233,000, or $2.20 a piece, on market last week, according to a substantial holding notice lodged with the NZX.

In June, Kirkcaldie announced it will shut up shop after 152 years as it entered into a deal with South African-owned David Jones. Since then the corporate raider has incrementally increased his stake, spending $199,317 in June to lift it to 6.9% from 5.7%, and a further $296,253 in July taking his stake to 8.4%.

David Jones will use the prime Lambton Quay location on Wellington's "golden mile" shopping precinct for its first New Zealand store, freeing up Kirkcaldie's board to return cash to shareholders.

Like many bricks-and-mortar stores, Kirkcaldie has been forced to discount stock to compete with online rivals.

Department stores in particular have come under pressure, including David Jones, which was taken over by South Africa's Woolworths Holdings and delisted from the ASX last year after sales and profitability fell. Kirkcaldie has been unprofitable for seven years.

David Jones will pay $A400,000 for the Kirkcaldie & Stains name and take over the lease of its flagship store, with the option to buy the retailer's assets for $500,000 within 25 working days.

The company's stock, valued at $8.3 million as at May 31, is not included in the sale and the company plans to sell any remaining stock from its Thorndon Quay furniture store after exiting its Lambton Quay store in February.

The New Zealand retailer had $18 million in cash and equivalents as at June 4 after selling its neighbouring Harbour City Centre. The rest of the proceeds went toward paying off $23.5 million in bank debt. Kirkcaldie will receive a final $4.75 million instalment on the sale in October.

Kirkcaldie shares surged as high as $2.29 after the David Jones announcement from $1.68 before the deal, having slumped to a record low $1.58 late last year. The stock last traded at $2.20.

Mr Brierley first emerged as a substantial holder of Kirkcaldie in 2011 when the company's shares were seen trading at a discount to the value of the company's real estate, the Harbour City Building.

Around that time, former Brierley Investments chairman Selwyn Cushing and his son David Cushing lifted their family's stake in the retailer to 17.1% and currently hold 19.5%, according to the Companies Office. The Cushings and Brierley are known for buying undervalued assets.

(BusinessDesk)