Tuesday, August 17, 2010

Direct Factory Outlets may be on the verge of collapse.

The company which owns Australia’s Direct Factory Outlets chain is believed to be locked in talks over its future after media speculation that it is struggling under $1 billion of debt and may be on the “verge of collapse”.

DFO, which has eight factory outlet-style centres operating on the Eastern Seaboard, was founded in 1996 by rich list members David Golberger and David Wieland, and is owned by holding company Austexx.

A report in The Sunday Age claimed Austexx was on the “verge of collapse” and with a “consortium of banks edging closer to foreclosing on the company”. The report also claimed experts from insolvency firm KordaMentha had been engaged to examine Austexx’s position.

A spokesperson for Austexx said company executives were not available to comment on the story. David Golberger was also unavailable.

However, SmartCompany understands Austexx is currently in talks with representatives from the company's banking syndicate. More details are expected to be released later today.

The potential effect that any problems at Austex may have on Goldberger and Wieland’s empire is unclear at this stage, as Austexx is only one of many of the pair’s investments.

The speculation comes less than six months after Austexx announced it was looking to find an investor or buyer for the business, with an asking price of about $1.5 billion placed on the company.

At the time, Austexx chief Geoff Porz said the company would consider taking a new investor into the business, selling the properties underlying the centre or selling the business outright.

A subsequent report in May in The Australian suggested British company Pradera Asset Management was interested in buying the DFO business, although no deal has been confirmed.

Goldberger and Wieland own 50% of Austexx, with other investors including Austexx executives Porz and Frank DeRango, and current ACCC chairman Graeme Samuel, whose stake has been held in a blind trust since he was appointed consumer watchdog in 2003.

According to reports, the DFO at Melbourne’s South Wharf precinct, which opened in 2009, is at the heart of the company’s problems.

The centre has not performed to expectations and parts of the development, including a cinema complex and food court, remain uncompleted.

Lenders to the South Wharf project are believed to include Suncorp Metway.

Goldberger and Wieland were valued jointly at $625 million on BRW’s Rich 200 list, down from $712 million in the previous year to what the magazine called a “better understanding of their company structure.”

The pair have made their fortune by taking on the Goliaths of Australian business. The pair met in 1974 and soon launched an independent petrol and retail distributor called Solo, competing directly with the dominant oil giants.

They sold the business to Ampol in 1989 for a reported $200 million and over the last 20 years have invested in a range of sectors, including property development (through their company Peninsula Development Group), advertising (through outdoor advertising company Octopus Media) and construction (through crane and equipment hire group Verticon).

In 1995, they also re-entered the petrol business with a new company called Liberty Oil. While the company was initially set up as a retailer, since 2001 the business has concentrated on the wholesale side of the petrol industry.

But without doubt, Goldberger and Wieland’s biggest investment in the last decade has been Austexx, which they started in 1996.

Since developing the first DFO in Melbourne, the chain has expanded rapidly with outlets in Sydney, Brisbane and Canberra.

Centres in Hobart and Townsville are also under development, and the executives had flagged potential international expansion into Asia.

The development of the DFO chain has also seen Austexx face off against major shopping centre owners including Westfield, who have regularly objected to the construction of new DFO centres.

However, Wieland and Goldberger clearly relished the role as David versus the Goliaths.

"We have always believed in competition and we have always been the smallest player against the biggest market and it was the same with petrol. This is no different,” Wieland said in 2006.

SOURCE: Smartcompany

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