Shareholders of unprofitable 152-year-old department store entity Kirkcaldie & Stains are in for a windfall, after confirmation Australian heavyweight David Jones is taking it over and opening its first New Zealand outlet at its Wellington site.
Since Thursday's announcement, Kirkcaldie & Stains shares have rocketed 33% to trade up to $2.29 by mid-morning yesterday.
Kirkcaldies' takeover reflects the changing times, following the change of ownership in mid-May of 112-year-old Dunedin department store Arthur Barnett, purchased by southern chain store H&J Smith for an undisclosed sum.
Most of the 270 Kirkcaldie jobs are expected to be retained by David Jones, which takes over the Lambton Quay site from February.
Kirkcaldie & Stains chairman Falcon Clouston said the retail environment had ''changed radically'' during the past decade and several options had been considered by the board for the company's future, including ''significant new investment'' and refurbishment, downsizing or business divestment.
''Kirkcaldie & Stains has sustained trading losses from its retail operation for the last seven years,'' he said in a statement.
Kirkcaldies recorded a $6.5million loss last year, mainly a loss on the sale of the Harbour City Centre, after reporting a $168,000 profit the previous year.
For the half-year ended February, the business made a loss of $501,000, BusinessDay reported.
Mr Clouston said as a single large format store, Kirkcaldies lacked the buying power and scale needed to compete with multi-store regional and global operators.
Those operators had the ability to create own brands, extract competitive supplier pricing and establish online sales platforms.
''A single store such as Kirkcaldies simply cannot cost effectively do [that],'' he said.
David Jones will take over the Lambton Quay main store lease. It will pay $A400,000 ($NZ431,034) cash for the name Kirkcaldie & Stains and has an option to buy the businesses fixed assets for a further $A500,000.
Shareholders will vote on the takeover by the end of July.
Mr Clouston said that after the vote the board wanted to make ''an early and substantial distribution'' to shareholders from available cash. Kirkcaldies' total liquid net assets are expected to exceed the company's current market capitalisation.
At $2.29 per share, market cap was $23.4million yesterday.
From the Harbour City building sale, and after paying off $23.5million in bank, Kirkcaldies holds $18million, with a further $4.75million receivable in October, plus the sale of the brand name for $A400,000 and potentially $A500,000 for the fixed assets.
