Furniture and electronics retailer Smiths City has entered a conditional agreement to be sold for $60 million to an investment company, with at least seven stores reportedly set to close. 

In a market update, the NZX-listed company said both its retail and finance operations would be sold to the investment company, Polar Capital, owned by Colin Neal, founder of refrigerated logistics company Big Chill.

As part of the acquisition, approximately seven of the company’s 29 stores will not be acquired under the transaction and will close as a result of the Group’s strategic review.

The final number of stores to be sold is dependent on lease transfers and new lease terms being agreed for those transferring stores, the company said.

The stores possibly slated for closure have not been revealed. 

The takeover deal is conditional on Polar Capital securing finance and an agreement is expected to be settled by Friday.

Smiths City Group Limited Chair Alastair Kerr sent an email out to all customers announcing the sale of the company. 

“As a valued customer of Smiths City, we advise you that Smiths City Group has today announced a conditional agreement to sell Smiths City Finance and most of its stores to Polar Capital, a 100% New Zealand-owned company,” the email said. 

“This will see around 22 of our 29 stores under new ownership and around 75% of our 465 employees retaining jobs.

“Your relationship with us stays the same.”

Alastair said Smiths City may have a new owner, but the business’ strong commitment to customers and quality service remains unchanged.

“It is business as usual for our stores,” his email said. “All Smiths City stores are currently open, and while a handful may eventually close, the majority will continue without interruption. 

“You can also be assured that if you are waiting for the delivery of a product you have already paid for – either a deposit or in full – you will receive it as expected. Even if the store closes, it will be delivered from another Smiths City store. 

“If you have paid Smiths City for a product you will get that product.”

At least seven Smiths City stores will be closed, pending a strategic review, and it is not yet known where the Alexandra store may fit in that plan. 

The email said Smiths City Finance will also continue.

The new owner, Colin, along with his team, built Big Chill over 24 years to become one of New Zealand’s largest companies of its type before recently selling it to Freightways. 

The email to customers said Colin is “passionate about growing businesses and sees Smiths City as a trusted brand that has been synonymous with providing great quality, excellent value and attentive no-nonsense service.”

“Colin invests in businesses for the long term and wants to see Smiths City’s proud 100-year history extended for many decades to come.”

“While we are expecting our stores to change hands this Friday 22 May 2020, it will be business as usual for Smiths City and its customers. 

“As a valued customer we deeply appreciate your support and hope to continue our relationship with you for years to come.”

The transaction values Smiths City assets at around $60 million, however, the net amount expected to be received is $8 million after debt and other liabilities.

It is believed the impact of the COVID-19 crisis had delivered a "material and significant shock" to the business.

Alastair told New Zealand’s Exchange (NSX) the company had been exploring options for a turnaround of the business but the impact from COVID-19 had forced it to find new capital and speed up the process.

"In addition to taking steps to preserve cash and contain costs in the face of these new trading conditions, the Board has explored numerous options to secure an injection of new capital. 

“These efforts have included discussions with our existing largest shareholders, and other potential strategic investors, to underwrite a broader capital raising. We have been helped throughout this wide-ranging process by our advisers PwC," Alastair told the NZX.

"However, it has now become clear that the transaction we have announced today offers the greatest opportunity for Smiths City to endure for the long term. It also offers the greatest opportunity to protect the jobs of as many of our staff as we can in this uncertain time. We are hopeful that under new ownership Smiths City will prosper."

Smiths City was founded in Christchurch in 1918 and has been part of New Zealand's retail landscape for more than 100 years.