Grays Auctions enters administration and potential bankruptcy after being fined $10M by ACCC

[onetrack]

Grays Auctions, the huge online auction house, that sells anything and everything from table decorations through to cars and massive earthmovers, has been placed into administration, after being fined a record $10M - after the ACCC found Grays had sold at least 750 cars to auction buyers with false and misleading descriptions. In addition, Grays are obliged to offer redress to the affected car buyers.

 

Grays Auctions was founded in 1922 as a family business by the Gray family, and ran onsite auctions, up until around 2000, when it commenced an online auction website.

Grays entered the big time when Geoff K. Gray sold 25% of the company to a fund management company, Caledonia (Private) Investments, in 2011.

 

In 2014, Caledonia purchased the remaining 75% of Grays Auctions, and backdoor listed the company on the ASX. However, in 2017, a Fleet Management company named Eclipx purchased the whole of Grays Auctions from Caledonia, and Grays was delisted.

Then, in a quick turnaround, in 2019, Eclipx sold Grays again, to another private venture capitalist, Quadrant Private Equity. Eclipx took a major haircut in the deal, buying Grays for $179M, and then selling it to Quadrant for $60M.

 

Eclipx claimed Grays was an "underperforming asset", but a large part of the problem would have been people with no auction skills, trying to run an auction house.

 

Quadrant tried to relist Grays on the ASX again in 2021, but pulled the float deal before it was all finalised. I'll wager there was an inadequate level of monies forthcoming to support the float, as rumours persisted of Grays under-performance.

Then the ACCC dropped a bomb on Grays, with the $10M fine, and the orders to redress the buyers losses. Quadrant took a massive haircut on Grays this week, selling Grays to Slatterys Auctions for just $2M. So much for good corporate management.

 

Part of the sale deal was that Slatterys Auctions would pay Grays $10M fine. I don't know if that is actually going to happen. Slatterys is only a modest-sized family auction business - but apparently a fairly successful one.

Slatterys have undergone a lot of expansion in recent years, expanding into divisions in nearly every State, from their home town of Newcastle, NSW.

 

Slatterys have promptly placed Grays into administration straight after the sale, as the company is effectively insolvent. That means a lot of Grays creditors are now going to take a massive haircut.

Those creditors must range across a wide spectrum, from suppliers to contractors to financiers.

It appears Quadrant still have an outstanding debt to financiers from the Grays purchase deal, which debt apparently runs to $145M. Westpac is their major financier.

 

All in all, this whole sorry saga can only be sheeted home to mismanagement by the corporate whizz-kids. Grays charge sellers anything up to 30% commission to sell items through them, and charge buyers up to 25% buyers premium - meaning Grays make a motza, coming and going. I can't really see how they could lose so much money over such a long period of time, especially with the level of trading that Grays do.

 

They sell thousands of cars a month and also sell virtually shiploads of Chinese-sourced products, from household items to a range of industrial products. Grays also operate auctions for a Qld-based company called Excavation Equipment, who import shiploads of Chinese industrial equipment. I don't know how Grays insolvency is going to affect Excavation Equipment, only time will tell, of course. 

 

https://www.accc.gov.au/media-release/grays-to-redress-consumers-and-pay-10-million-in-penalties-for-misleading-descriptions-of-cars-for-sale-by-auction

 

https://www.itnews.com.au/news/axe-swings-after-179m-grays-online-buy-blows-up-525037

 

https://www.drive.com.au/news/grays-online-enters-administration-days-after-sale-to-slattery-auctions/

 

Edited yesterday at 02:56 PM by onetrack

[Marty_d]

That's a lot of haircuts.

Maybe they should diversify into hairdressing?

[facthunter]

SKY "SLAMS" A lot of things too.  I thought it was a "DOOR" thing.   Nev

[Jerry_Atrick]

Large corporations have a track record of destroying the real value of businesses they takeover. The M&A world is literally full of carcasses of the businesses that were taken over. I used to work for a large Aussie retailer, and most of the independent businesses it took over didn't realise the supposed gains, and some did depart the ASIC register. 

 

The best performing M&A type activities are where an operating company run by its owners take over acquisitions. Think turn-around venture capital firms that specialise in certain industries - and, although his Simggles chain is suffering - Solomon Lew (regardless of what you think of him - at that level, they are all the same). He has lived and breathed retail all his life, and his acquisitions tend to fare better than others, although he has had his bumps on the way. 

 

Publicly listed companies and funds are a recipe for disaster as acquirers. It is the reason why, on announcement of a deal, the share price of the puchased (prey) company usually goes up and the share price of the purcashing (predator) company ususally goes down (assiming both are listed).

[old man emu]

I couldn't help noticing today as I walked through a shopping mall in Dubbo, how many retail chainstore premises had closed down. I must admit that most of these were clothing stores. 

[pmccarthy]

Would bother SWMBO but not me at all.

[Jerry_Atrick]

They are all moving to Chaddie (Chadstone):  https://www.consultancy.uk/news/12744/chadstone-shopping-centre-expansion-opens-its-doors

 

Soon it will be visible from space if it isn't already.

Edited 8 hours ago by Jerry_Atrick

[red750]

Many shopping malls are expanding. Two near me are Eastland at Ringwood and Knox City at Wantirna.

 

I used to work new Eastland and it was a nice little mall about 30 years ago. Today it is a jungle. I've only had to go there three or four times in the last year, and I have no idea where things are. I have to take my daughter as a guide. Knox City is pretty much the same.

 

My regular mall is Forest Hill Chase, and it is still fairly small. But there are about a dozen shops or more closed for renovations at any one time. They move around to renovated shops so you've got to hunt for what you want, but it's still only three levels. There is no indication of any extensions. One of the travelators has been under repair, promised "soon", since last Christmas.

Some stores, like the butcher, and JB Hi-Fi have left the mall and a few retail chains have gone into liquidation here and elsewhere (eg Rivers clothing and footwear). But new stores are moving in. KFC are about to open in the food mall, 20 metres from McDonalds, and a fourth audiologist/hearing aid shop is opening. There's a Coles, Woolworths, Aldi, and two Asian supermarkets.