Wesfarmers has decided not to float off its Officeworks business unit because of poor conditions on the local equity market.
Australia’s largest private employer has been doing a strategic review of the office supplies retail chain, which included a potential initial public offering (IPO).
“In light of current equity market conditions, Wesfarmers has determined that an IPO of Officeworks at this point in time would not realise appropriate value and would not be in the best interests of its shareholders,” the company said in a statement.
Retail IPOs are under scrutiny because of a string of failures in the sector due to digital disruption and poor consumer sentiment. The market is also looking at the impact of Amazon’s impending arrival in Australia on the local retail industry.
Officeworks has more than doubled its earnings since Wesfarmers acquiring the business in 2007. Officeworks in February posted a 5.1% rise in earnings to $62 million for the half year to December.
Wesfarmers managing director Richard Goyder says he’s comfortable retaining Officeworks.
In February, when announcing the strategic review, the company said: “Officeworks is well positioned for future growth with a strong competitive position and ongoing initiatives to grow its addressable market.”