26 Feb 2016

Dick Smith calls for closure inquiry

8:03 pm on 26 February 2016

The founder of electronics chain Dick Smith wants Australian authorities to look into the business dealings that led to the collapse of his former company.

The chain's receiver has announced all stand-alone stores in New Zealand and Australia will close, after it was unable to find a suitable buyer.

The retailer, which has more than 400 stores in Australia and New Zealand, had been struggling with too much stock and falling demand when banks pulled the plug on its financing arrangements earlier this year.

Private equity company Anchorage Capital bought Dick Smith from Woolworths in 2011 for $A115 million, before selling it through a share float in 2013 for $A520m.

The electronics company's founder, Dick Smith, told Checkpoint with John Campbell he was alarmed and outraged by the company's valuation at the time.

"It was obvious that a company that had been worth $90m a couple of years before could not possibly be worth $500m.

"What Anchorage did, while it might've complied with the law, it certainly wasn't ethical."

He said he hoped the Australian Securities and Investments Commission would look into the lead-up to the company's collapse.

"It's very sad and I feel tremendously for the staff ... It's all so unnecessary.

"If this greed hadn't been involved to float the company at a value that it could never be worth and to drain it of value - they'd all have jobs today."

He said he understood the Australian Senate was taking an interest, and he totally supported that.

Dick Smith has 62 stores in New Zealand, which are expected to close over the next eight weeks.

The closure will affect about 430 staff in New Zealand, who are entitled to redundancy payouts of up to $22,160.

The entitlements of those who are made redundant will have preferential treatment over other secured creditors.

In a statement to the Australian Securities Exchange, receivership firm Ferrier Hodgson said it was a disappointing outcome.

"While we received a significant number of expressions of interest from local and overseas parties, unfortunately the sale process has not resulted in any acceptable offers for the group as a whole or for Australia or New Zealand as standalone businesses," Ferrier Hodgson spokesperson James Stewart said.

"The offers were either significantly below liquidation values or highly conditional or both."

There was some interest from local and overseas buyers for the stores, but none of their offers convinced the receivers to sell.

Anchorage Capital declined to comment on the chain's closure.