Physico and Ed Harry combine in public float

The Australian clothing industry has spawned a new public company, Biron Apparel Limited, as Fraser McEwing reports.
In operational terms Biron is a merger of garment importer/wholesaler Physico Clothing Company Pty Ltd and retailer Ed Harry Menswear, utilising a publicly listed cashbox company, Biron Capital Limited, which has changed its name to Biron Apparel. Funding for the acquisitions includes a combination of bank debt and equity funds raised through the company's prospectus.
Biron Apparel will continue both components of the business in their current directions, except that Physico will become a supply source for Ed Harry.
Physico's David Greenblo, who is now group managing director of the new public company, said that Physico's contacts and experience in souring from China would be put to good use in supplying Ed Harry. But, he emphasised, it would only supply a percentage of Ed Harry's merchandise. He said it was essential that Ed Harry bought from other suppliers and that Physico had to compete for Ed Harry's business as though it were an independent supplier.
The forecast 2005 turnover for the public company is $121 million, made up of Ed Harry with $76 million (retail) and Physico with $44 million (wholesale).
GROWTH
Growth in Ed Harry will be achieved with a projected net annual increase of between 12 and 15 stores throughout Australia. Currently it operates 175 stores. By contrast, Physico will look for significant growth in its overseas business between China and various other foreign markets. Greenblo believes that the trend among major retailers to develop their own importing programs will restrict the growth prospects of the Physico side of the business in Australia.
PHYSICO Physico was founded by David Greenblo and Colin Elterman in 1993. Previous to that the two men had established a retail sporting goods business which they built into a ten store group and subsequently sold. Their Physico clothing venture then went on to become a major Australian supplier specialising in the sourcing of women's apparel and sleepwear to the major department and specialty chains in Australia and New Zealand. Physico brings to the new public company established sourcing operations in China which, in addition to Australia, export men's, women's and children's apparel to volume retailers in Europe, Canada, Russia and South Africa. The company operates from 7,000 square premises comprising offices, showrooms and distribution center in the Sydney suburb of Alexandria. It also has a sourcing office and showroom in Nanjing, China, and sales offices in South Africa.
ED HARRY
Ed Harry was established in 1986 and is now Australia's largest independently owned specialty retailer of men's apparel - calculated by the number of company owned stores. Its 175 stores are located in every Australian state except Tasmania and employ around 660 people. Ed Harry's clothing range has a defined target market of men aged between 25 and 45.
Products have a strong commercial fashion element and a high quality to price ratio. They lean toward casual wear and, to a lesser extent, evening dressing and formal wear.
MANAGEMENT
Putting these two successful companies together in a public structure has meant some recasting of management roles.
The executive team of the new Biron Apparel is lead by 48 year old group managing director, David Greenblo. He immigrated to Australia from South Africa in 1980 with an economics degree and began his career in the apparel industry at Myer as a graduate trainee. He subsequently held various management positions in both buying and store management, including various positions at Cue Design, a vertically integrated retailer, and DeGreenblo's partner in Physico, Colin Elterman, takes on the key role of business development manager in the new company. Both he and Greenblo have been allocated shares in Biron Apparel, but have signaled their intention to purchase further shares as an expression of their confidence in the public float.
At the time of the acquisition the managing director of Ed Harry was Neil Brine. He has become executive director, retail, in the new structure and will play an advisory role in the Ed Harrry side of the business.
CEO of Ed Harry, which will remain based in Adelaide, is Mark Slattery. CEO of the Physico business is Sean Rohald. Chief financial officer for the new company is Mark Pearson.
SHAREHOLDING
Collectively, the senior management of Biron will hold over 37 per cent of the ordinary equity of the Company. In addition, senior management will also hold a significant number of performance shares in the company.
The purpose of the prospectus was to raise $9 million in cash through the issue of 15
million shares to enable the company to proceed with the acquisitions of Ed Harry and
Physico. The acquisition agreements for Ed Harry and Physico were entered into on 18
July 2005 and 3 August 2005 respectively.
The Prospectus also offered 11.3 million shares in partial consideration for the acquisition of Ed Harry and Physico and for transaction fees, 11.3 million performance shares, one million 60 cent options to be issued to directors of Biron,
and three million 72 cent options are to be issued to the debt underwriter.