GraysOnline sells 25% stake to Caledonia Investments for $35m, will consider floating in near future

Online auction house GraysOnline has sold a quarter of its business to Caledonia Investments, with a chief investment officer to take a seat on the company’s board, in order to provide more professional experience as the company matures and possibly heads towards a float.

Caledonia Investments chief investment officer Will Vicars says the company is looking at whether it can pursue a public listing in the near future.

“A public market is often attractive to people. This company has a long future in front of it, and a public listing is much more likely than being sold to someone else,” he says.

GraysOnline chief executive Cameron Poolman says the company, which until now was owned by 38 employees who bought into it, was looking for some executive experience and wanted to add more professionals to the board in order to reduce risk as the company grows.

“We’ve wanted to de-risk the shareholders and to do that we needed some expertise in the business. We don’t have any external directors, and the company is getting larger, and at that point we’re looking at different opportunities which require more decisions being made,” he says.

The 38 shareholders have sold a 25% stake in the company, which values it at about $140 million. According to the 2010 sales figures, GraysOnline turned over $310 million in the 2010 financial year.

Vicars says that Poolman has been able to create a successful online business so far, but taking it to the next step will require further management.

“Part of the evolution of a company, when it continues to grow, is that sometimes it needs capital and sometimes they need people on the board. I’m going to be on the board of the company and we’ll be adding influence there.”

But Vicars also says the investment group doesn’t want to change too much, saying that “Cameron has done an extraordinary thing in taking a business, putting it fully online and turning it into an integral business for many people”.

Grays operates as an online auction site, and first started in 2000. It sells a variety of products but is most well-known for its wine business, which is expected to turn over 750,000 cases this year. After a management buy-out in 2005, the company refocused its online operations.

Poolman says the business has become a mainstream retailer over the past five years, and it wants to see what it can do with some external management experience.

“We’ve been very successful, but as we grow we are seeing more risk in our decisions in the internet space, and that is something we certainly don’t have much experience in. We need a partner that has that experience.”

“From a corporate point of view, we really want to strengthen our board. We’ve seen our business become very mainstream, and we have a number of opportunities present themselves to us.”

“We have high expectations for new growth areas, and we’re going to pursue those.”

Vicars says the company has “a long evolution ahead of it” and that discussions will begin about what avenues it can take for new growth areas.

“Grays is in a good market position. It’s a managed product for other organisations, there are a litany of things it can do.”