Buyers queue up for a shot at Dick Smith

More than thirty businesses have lined up to buy Dick Smith Holdings even before receiver Ferrier Hodgson launches the sale campaign for the troubled retail chain.

The strong buyer interest in the electronics business in Australia and New Zealand is likely to fuel criticism from within the senior ranks of Dick Smith that its bankers, National Australia Bank and HSBC were hasty and the chain should have been allowed to trade through its difficulties.

More than thirty buyers have lined up to buy embattled electronics retailer Dick Smith.
More than thirty buyers have lined up to buy embattled electronics retailer Dick Smith. Photo: Josh Robenstone

The line up of would-be buyers range from businesses keen to outright own the chain as well as opportunistic operators, looking to pick off the most profitable stores.

Dick Smith owes more than $140 million to its banks as well as more than $200 million to creditors but sources close to the company claim its debt always spikes at this time of year and the banks acted 'hastily" in installing receivers on Tuesday.

It's understood a number of senior personnel at Dick Smith were shocked when their bankers signalled they could no longer support the business.

Ferrier Hodgson would not comment on the buyer interest except to say that advertising for the expression of interest campaign would start next week and it expected the number of interested parties to significantly increase after this.

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It's understood a number of buyers "kicked the tyres" of Dick Smith after its profit warnings in the last few months of 2015 and analysts suggest the most likely buyer will be outside of the consumer electronics space.

David Gordon, managing partner at accounting and advisory firm LZR Partners said there would be retailers  with no direct involvement in the electronics category that could apply their experience to improving sales at Dick Smith.

He said the big question for a new owner was whether they source product better than Dick Smith.

"This is a low margin category and it has a very strong market leader in JB Hi-Fi," Mr Gordon said.

"But I'm sure there are retailers that are not directly involved in the category, someone like a Super Retail Group which could use its sourcing and retail expertise to enter into a new category."

One Dick Smith insider said he believed the business was viable as a going concern and he wouldn't be surprised if a buyer bought it on that basis.

He said the store foot print was more diverse than any of its competitors however he said the key challenge was managing suppliers.

"The big brands in this market have enormous power and they require cash on delivery , otherwise they don't supply you," he said.

Ferrier Hodgson is expected to compile a short list of potential buyers once it has assessed the expressions of interest. These parties will then submit a formal offer and this process is expected to run into February.

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