Midas Australia up for sale after collapsing into administration
Tuesday, January 6, 2009/
Administrators are looking for a buyer for troubled car servicing company Midas Australia after the business was placed in administration by its directors on 23 December.
Administrators are confident of finding a buyer for troubled car servicing company Midas Australia after the business was placed in administration by its directors on 23 December.
Administrator George Georges of Ferrier Hodgson will hold a creditors meeting on 7 January in Melbourne and is in the process of attempting to find a buyer for part or all of the chain.
Georges says he has already received a dozen unsolicited offers for the business.
“It’s been extremely positive form that regard. I’ve got a good level of confidence that the business can be sold, although the question is always at what price.”
Midas has 91 stores around Australia and about 30 of these are operated by franchisees.
Georges says he is currently undertaking a financial review of every store and will make a decision about store closures in the coming days. It is likely that some unviable stores will be closed.
Meanwhile it is business as usual for the Midas chain and the administrators will continue to run media advertisements for the chain, including a campaign on the Nine Network this weekend. Georges says he had held discussions with Midas employees and landlords and received good support.
Georges says the company has been hit hard by the global credit crisis and the recent fall in petrol prices, which has stymied its attempted push into the LPG conversion market. “The LPG gas program has not worked to their advantage. People are reticent to pay $4000 for a LPG conversion at the moment.”
Georges says that while Midas is in relatively good shape from an infrastructure point, the company needs to focus first on ensuring the stores within its chain are viable. Following that, the business needs to get bigger.
“They are only at 91 stores. In reality they need to be closer to 120 stores to be a stronger chain.”
The collapse of the chain is a blow for investors John Fletcher (the former chief executive of Coles and Brambles) and Lazard Carnegie Wylie Investment Management, which invested an undisclosed amount in March 2008.
The two investors joined the Midas board with chief executive and shareholder Phillip Bonney, who purchased the Midas Australian operation from its American owners in 2000.
Bonney has now been removed as chief executive and replaced by Tim Hickey.
Georges says Fletcher and Lazard Carnegie Wylie are “open to any suggestions” concerning the future ownership of the business. “They are open to a sale of the business, they are open to investors coming on board.”
The past five years has seen Midas Australia locked in vicious disputes with several of its franchisees and former franchisees.
A group of franchisees took legal action against Midas Australia over misrepresentation and breach of contract, while former Midas franchisees David Turner and Heather Shearer lodged complaints against the company with the Australian Competition and Consumer Commission and the Australian Securities and Investments Commission. Both watchdogs declined to take action against Midas Australia.
In October 2007, a group of 45 franchisees met to discuss the future of the franchise systems as fears grew about the profitability of the chain.
Many of the Midas stores contacted by SmartCompany expressed a desire to continue operating under the Midas brand and were hopeful new buyers could be found.
“It’s a very popular brand, an iconic brand and we’re certainly doing everything in our power to continue this business,” Georges says.
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