Was Harris Scarfe Already Bust When Sold Five Weeks Ago?
Serious questions are being asked after South Australian retailer Harris Scarfe was suddenly placed into administration today, weeks after Greenlit Brands who earlier in the year changed their name from Steinhoff sold the retailer to Allegro Funds.
ChannelNews understands that back in November appliance suppliers to Harris Scarfe were chasing payments while the struggling Greenlit brands was in the process of selling the retailer to the Allegro Fund.
What’s not known is whether Allegro Fund were told about the level of debt in the business or whether they actually did due diligence on the acquisition of Harris Farm before they acquired the business from Greenlit Brands in what appear to have been a ‘job lot’ sale of retailers Plush, Fantastic Furniture and Freedom.
Earlier today Deloitte Restructuring Services partners Vaughan Strawbridge, Kathryn Evans and Tim Norman were appointed receivers and managers over Harris Scarfe by a secured lender following the appointment of Andrew Sallway and Duncan Clubb of BDO as voluntary administrators earlier in the day.
Shortly afterwards the receivers said that are now attempting to sell Harris Scarfe as a going concern while restructuring the business, possibly closing loss-making stores.
ChannelNews understands that this is what Greenlit Brands who according to the Australian Securities and Investments Commission lost $23.7 million net in 2018 have been trying to do for the past 12 months before Allegro took the retailer off their books. We have been told that several organisations were approched to buy the South Australian retailer but rejected the business.
“Greenlit Brands sold four of its labels, including Harris Scarfe and Best & Less, to Allegro Funds in November and weeks later they are calling in the receivers, this smells” said one appliance distributor.
Last year, Greenlit Brands decided to split and move away from its subsidiary, Steinhoff which was tainted by a massive accounting scandal.
Currently several appliance and electrical suppliers are owed money by Harris Scarfe including Spectrum Brands who have the Russell Hobbs and Remington brands, also exposed are Electrolux who own the Westinghouse brand as well as Tefal.
“Disposal of the general merchandise business is a significant strategic initiative which will allow Greenlit Brands to concentrate on its core household goods brands and optimise their already-strong position in the Australian and New Zealand markets,” explained Michael Ford, the Executive Chairman and Group Chief Executive of Greenlit Brands.
Ford who was CEO of The Good Guys when the business was acquired by JB Hi Fi has not said whether Allegro Fund did due diligence on the Harris Scarfe sale. He has also not disclosed how much debt the retailer was carrying when the business was sold back in November.
Allegro Funds acquired the two brands for an undisclosed amount. “We look forward to supporting a highly experienced management team to transform each of the brands,” said Fay Bou, Managing Director of Allegro Funds.
“The general merchandise business includes some iconic retail brands that have long-standing loyal customers and passionate staff that have supported the business serving generations of Australians and New Zealanders.”
Back in November the Company said that the acquisition of Harris Scarfe was set to be completed by early December.