Wesfarmers eyes big bucks from Officeworks IPO

Perth-based retail and mining conglomerate, Wesfarmers, is aiming to raise $1.1 billion by selling or floating its office products retailer, Officeworks.

The retailer is expected to list with a market value of between $1.33 billion and $1.52, according to The Australian, with Wesfarmers set to float the Officeworks business through Macquarie, JPMorgan and UBS.

Officeworks’ earnings have nearly doubled since Wesfarmers purchased the business a decade ago as part of its $19.3 takeover of supermarket chain Coles, reports from Reuters said.

The office products retailer's profits climbed five per cent, reaching 62 million in the six months ended December 31.

Additionally, Officeworks sales are expected to grow 5.7 per cent in fiscal 2017 and 2018 and Earnings before interest and tax are expected to grow 7.1 per cent this financial year and 6.9 per cent the following year, according to media reports.

Wesfarmers flagged a consideration for an Officeworks IPO in February, yet a number of research reports distributed to investors on Monday highlighted the high price hopes for the business, according to Reuters.

Officeworks operates 163 stores across every state and territory and employs roughly 7,000 staff.

The retailer sells products from key vendors such as Dell, HP Inc., Lenovo, Acer and Brother.

Wesfarmers' move to float Officeworks follows a string of recent private equity activity in the office supplies retailer space.

In March, private equity investment firm, Platinum Equity, struck a deal to acquire Staples’ Australian and New Zealand operations.

The two companies, both headquartered in the US, announced on 13 March that the acquisition would see Platinum Equity acquire Staples’ A/NZ for an undisclosed sum, with the transaction expected to close in the second calendar quarter of 2017.

Locally, Staples has made a name for itself in the IT services space, in addition to office products and solutions.

Platinum Equity principal, Adam Cooper, said at the time of the acquisition that the business has “extraordinary” potential as a standalone enterprise in the local market.

“It has a strong customer base, dedicated employees and a long history in the markets it serves,” he said.

Certainly, the private equity firm sees dollars in the office products and solutions market, as the Staples acquisition has been followed by yet another more recent deal to acquire OfficeMax in Australia and New Zealand for an undisclosed sum.

While Platinum Equity group's latest deal remains subject to regulatory approval in each country, it is expected to close within the next “several months”.

It remains to be seen whether the acquisition will see OfficeMax undergo a re-brand in the local market, as was the case with Platinum Equity’s acquisition of the Staples business in the A/NZ region from that company’s parent organisation in the US.

Platinum Equity is a global investment firm with more than $11 billion of assets under management and a portfolio of approximately 30 operating companies that serve customers around the world.

It is currently investing from Platinum Equity Capital Partners IV, a $6.5 billion global buyout fund.