Description

Retail Holdings is a familiar name on VIC.  It may be the longest running liquidation in history, now in the range of 14 years.  It has been written up four previous times.

The liquidation process has been a success and investors have had many opportunities to purchase the stock along the way and make a very good IRR.  I went back and looked at my return recently.  I purchased the stock in 2005 at $5.50 a share.  The IRR to date is 26%, receiving $28.75 in dividends and distributions along with a current share price of $10.50.  

Retail Holdings is now in the final stages of its liquidation.  I estimate approximately $12.90 in distributions to be made in the next 12 to 24 months for 23% return from current stock price of $10.50. 

Retail Holdings has recently entered into an agreement to sell its subsidiary in Bangladesh which will add $8.70 in cash to the $1.70 in cash currently at the holding company. That will leave one asset left to be sold, a controlling stake in Singer India Limited with a current value of $2.50 per share.  Adding it up comes to $12.90 per share.  The company has stated that it will buy back stock this year, so you could make an assumption that accretive share repurchases will mitigate or eliminate any final liquidation costs, any maybe even add to the estimate of the total to be distributed. 

I value Singer India based on the publicly traded shares (Singer India Limited: SINGER.BO).   

Here are parts of the press release announcing the sale of its Bangladesh business: 

Retail Holdings N.V. (“Retail Holdings”, together with its subsidiaries and affiliates, the “Company"), announced today that its indirect 54.1% owned subsidiary, Retail Holdings Asia B.V.,has entered into an agreement to sell its entire equity interest in that company’s subsidiary, Retail Holdings Bhold B.V. (“Bhold”),to a subsidiary of ArçelikA.S.(“Arçelik”), a member of the Koç group of companies, Turkey.

 Bhold’s assets include a 57.0% equity stake in Singer Bangladesh Limited (“Singer Bangladesh”); the remaining 43.0% of Singer Bangladesh is publicly owned. The transaction is anticipated to close in April. Singer Bangladesh is the largest retailer of consumer durables in Bangladesh, with 385 company stores and 720 wholesale dealers. Turnover in 2018 was Taka 13.7 billion (approximately US$164 million), profit after tax was Taka 920 million (approximately US$11 million). Singer Bangladesh is the only listed household consumer durables company in Bangladesh; it is widely regarded as one of the Bangladesh blue chip, multi-national companies. Founded in 1955 as a subsidiary of Koç Holding, Turkey's largest industrial conglomerate and a member of the Fortune 500, Arçelik is a leading player in the home appliance industry with 21 manufacturing facilities in eight countries; it is the third largest home appliance company in Europe. Arçelik provides goods and services in 145 countries with its 12 brands.

 The net cash consideration to be received for the Bhold shares is approximately US$75million, subject to certain post-closing adjustments. Approximately 54.1% of this amount is attributable to the Retail Holdings shareholders. Commenting on the transaction, Stephen H. Goodman, the Company’s Chairman, President and CEO, noted “The Singer Bangladesh business will benefit significantly from the new relationship with Arçelik. Arçelik shares with us a commitment to serving Singer Bangladesh customers, employees and markets with the finest products and services and operating to the highest industry standards. They possess a very strong balance sheet and decades of highly successful operating experience across many markets around the world. Following the sale, Singer Bangladesh will continue to have a royalty-bearing license from SVP Worldwide, the owner of the Singer trademark, to use “Singer” in the company name and the “Singer” brand on its stores, products and services. The Bangladesh Company will also have access to the extensive Arcelik brand portfolio.  Mr. Goodman continued, “The sale is a very significant milestone in the execution of Retail Holdings stated short-to-medium term strategy, to maximize and, ultimately, to monetize the value of its assets, with the objective to divest these assets and to distribute the resulting funds to shareholders. Following the sale, Retail Holdings only remaining operating asset will be Singer Asia’s 59.1% equity interest in Singer India Limited. No decision has yet been made as to the form of the distribution of the proceeds from this transaction and the approximately $8 million in cash accumulated at Retail Holdings.

Steve Goodman has been running the holding company since 2000.  My experience as an investor is that he has done an excellent job managing the business and doing the best for shareholders.  I would expect that to continue with the final steps in liquidating the company.  Mr. Goodman owns a 4.8% equity interest in the last remaining operating company and has ample incentive to maximize the value. 

Catalyst

Closing of sale Singer Bangladesh

Sale of Singer India

Liquiating distribuitons

Stock purchases