Retail Holdings announced today that a 54.1% owned subsidiary has entered into an agreement to sell their whole stake in Singer Bangladesh for $75 million. Given that Singer Bangladesh is the largest remaining piece of Retail Holdings assets this gets the company pretty close to the finish line with regards to their plan to fully liquidate. Besides Singer Bangladesh they only have a 60.8% stake in Singer India left that is also owned indirectly through the same subsidiary.
While the sale of Singer Bangladesh is nice, the price is very disappointing. Retail Holdings owns (indirectly) a 37% stake of Singer Bangladesh that is worth $91 million based on the latest market price in Bangladesh. Besides this stake, they also own a 20% stake consisting of non-remittance shares and these shares have $15 million in accumulated unremitted dividend distributions. Given the restrictions these shares have with regards to paying distributions to shareholders outside Bangladesh it makes sense that these are worth substantially less than normal shares, but I think they should certainly be worth something. Selling their whole Singer Bangladesh stake for a discount to the latest market price and throwing in the non-remittance shares and their accumulated unremitted dividend distributions for free seems a pretty bad deal. In a best case scenario, with a zero percentage discount, these assets could be worth $155 million, more than twice the agreed upon price of $75 million.
Despite the bad deal the stock is up a tiny bit today, which makes sense. Most of Retail Holdings market cap will soon consist of cash, and presumably be returned to shareholders. Taking into account the $75 million that will be received for their Singer Bangladesh stake, NAV/share stands roughly at $12.40 which means that there is actually a little bit of upside left from today’s share price of $11.66. Guess that shows that buying stuff with a sufficiently big discount does offer some margin of safety, but still: I’m pretty disappointed by this outcome.
Author is long Retail Holdings