A float for Dixon Hospitality
Dixon Hospitality, the pub fund backed by former Spotless boss Bruce Dixon, is heading for an IPO.
When it hits the boards, it will be worth $200 million.
The float is expected to be priced at seven times the forecast $29 million the pub fund hopes it will make in earnings before interest, tax, depreciation and amortisation.
Between 10 and 15 Australian institutional investors are being lined up to back the deal.
But the challenge is Spotless.
Convincing investors to come on board for a Bruce Dixon-backed company might be an issue when Spotless, the outfit Bruce Dixon ran, has been tanking.
Spotless shares have crashed on the back of a profit downgrade shortly after it listed and more than half its original value has been lost since it floated in 2014 at $1.60 a share when Mr Dixon was in charge.
The company was founded by Mr Dixon and his son, Michael, in 2012.
Since then, it’s been building up its portfolio.
That included it snapping up the distressed pub assets recently within the failed Keystone portfolio.
The other challenge for the Dixon float is attracting investors when the pubs in the Dixon portfolio don’t have lucrative poker machines.
All that Evans and Partners, who are managing the float along with Morgans, can do is point to the company’s earnings.
The group has 48 venues throughout Australia and in fiscal 2016, it made $13.5 million in EBITDA after significant items.
It’s now forecast to make $29 million in fiscal 2018. It hopes to make a $13.5 million profit in fiscal 2018. That’s more than double the $5.8 million profit it made in fiscal 2016.
Meanwhile, plans to sell Dixon’s hedge fund-backed rival Redcape have been put on hold until Woolworths is better positioned as a buyer.
Some investors might prefer Redcape because it has stronger earnings prospects thanks to the money it makes from slot machines within its pubs, many of which are located within more affordable suburbs of Brisbane and Sydney.
by Leon Gettler, March 17th 2017
