In Finance by Clyde Mooney

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After shelving its mooted IPO, Dixon Hospitality Group is rumoured to be in talks with private equity buyers – including KKR – the company that sank Keystone.

Dixon Hospitality Group (DHG) has hinted at plans for an Initial Public Offering almost since it burst into the Australian hospitality spotlight with meteoric expansion courtesy of a swathe of portfolio acquisitions, including the Open Door Pub Co’s 17 pubs, the three Drink n Dine pubs, and the five Beer Deluxe pubs.

But news that the IPO had stalled has surfaced, the official line being a private equity buyer had been found for DHG, which has grown to count 48 venues across three states.

Founded by former Spotless CEO Bruce Dixon, with his son Michael, DHG has come to count several other former Spotless executives, and has championed a business based on the high returns of leasehold operations, and the societal approach of ‘strictly no gaming’.

Now, The Australian suggests that DHG is being eyed by KKR (Kohlberg Kravis Roberts) – the same New York private equity firm that called time on Keystone’s debt, bringing about its liquidation.

This follows from the news last December that DHG had purchased six of Keystone’s venues under receivership, in a deal reported to be worth around $40 million – funded by KKR. The debt was thought to be due with completion of the IPO.

Interestingly, KKR is also part of a large consortium bidding against Tabcorp to buy gaming and wagering stalwart Tatts Group, and obviously does not share DHG’s distaste for poker machines.

DHG was set to be listed with valuation around $186 million, representing just over six times earnings before EBITDA, which is on par with the likely valuation of the leasehold operations, circa 16 per cent.