08/05/2006

THE AUSTRALIAN FINANCIAL REVIEW:  Simon Evans

A former Myer executive with a war chest of more than $50 million is eyeing acquisitions to add to an existing stable of four clothing companies backed by a Deutsche Bank private equity fund.

Pacific Apparel Solutions is positioning itself as a mini version of listed rival Pacific Brands, albeit with brands that are not as well known among shoppers.

With chief executive Eric Morris at the helm and former Mayne Group and Coles Myer executive Bob Dalziel as chairman, Pacific Apparel is pushing to buy other clothing suppliers in a highly fragmented industry.

The company already owns several brands including Yarra Trail, Black Pepper, Breakaway and Yvonne Black.

Mr Morris was the head of Myer’s private label division until August 2005 and responsible for driving growth at some of Myer’s own brand labels, such as Urbane and Basque.

He said Pacific Apparel was in talks with up to four different parties for potential acquisitions.

“There are some pretty good, solid companies that we’re looking at,” he said.

Deutsche’s private equity arm, DB Capital Partners, holds 86 per cent of Pacific Apparel.

Management and Mr Dalziel hold the remainder.

Pacific Apparel looked at the Lew family’s Witchery chain when it was up for sale late last year but decided against making an offer.

While Mr Morris accepted that organic growth among clothing wholesalers was relatively flat, he said there were robust opportunities for well-managed niche players.

Pacific Apparel generates earnings before interest and tax (EBIT) of between $20 million and $25 million a year and is eyeing a possible float as early as 2007.

Mr Morris said sales to Myer represented 15 per cent to 20 per cent of the company’s revenue, with a similar amount generated by sales into David Jones stores.

Supplies of children’s and teenagers’ clothing to Target delivered a further 20 per cent of sales.

Mr Morris, a South African who started with Myer in 2003, was previously based in Hong Kong as regional director of Reebok’s Asia-Pacific business.

He said that once Pacific Apparel had EBIT of $30 million a year it could start assessing the potential for a public float.


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