Shareholders in troubled automotive parts retailer Repco today begrudgingly approved the sale of the company to private equity firm CCMP, but not before the board was given a solid bucketing for arguably presiding over Australia’s worst-performed listed retailer.

Repco was a struggling division of Pacific Dunlop before it was snapped up by a private equity consortium for a bargain in 2000. After plucking the low-hanging fruit, such as rationalising 17 distribution centres down to five, it was refloated at $2.65-a-share in 2003, crystalising a 400 per cent equity return for that set of ‘barbarians’.

All seemed fine for the first year after listing and Repco shares even hit a high of $3.50 in early 2005 before a bungled retail and infrastructure strategy, coupled with a poor integration of the $90 million Alesco acquisition, sent the share price tumbling to a low of 85c last August.

Three retail shareholders, including yours truly and one extremely vociferous Chinese man, blasted the board for an appalling performance. However, the institutions still backed the miserable $1.75-a-share offer with 91 per cent of the shares in favour and 89 per cent of the members supporting the deal.

As usual, the institutions were nowhere to be seen at a public company meeting when a board was deserving to be shellacked. For the record, Franklin Resources, Perpetual, Lazard, Schroders and NAB had 53 per cent amongst them and each held more than the 11 million shares that voted against the scheme, which suggests they all backed it.

It was probably the last public outing for former Brambles finance director Michael Brown, who carries the odium of chairing Repco for three years until 2007 when he handed over to Woolworths director Leon L’Huillier, who lasted just a few months.

Brown is one of James Hardie directors facing prosecution from ASIC, so he’s hardly going out with a bang.

As with all private equity bids, the separate negotiations between the board and then the management about committing to the future threw up some interesting conflicts.

Managing director Graeme Yeomans, who only joined in July 2006, initially declined an offer to take up an incentive scheme from CCMP but is pocketing almost $1 million from the sale as his current incentive package crystalises thanks to the change of control. Graeme and the rest of the management team will now hammer out new arrangements with CCMP.

It will be very disappointing, indeed, if Graeme manages to turn the thing around and the public markets get offered a cleaned up Repco at more than $3-a-share in three years time. The question then will be why on earth couldn’t that be done in the public markets?

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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