I've been looking more closely at Harvey Norman after the recent weakness in HVN shares.

This is purely an investment thought experiment based on publicly available information. I have no knowledge of any takeover, proposal or discussions.

What caught my attention is that Harvey Norman isn't simply a retailer.

At FY25, Harvey Norman reported approximately:

• $4.53 billion freehold property portfolio
• $8.37 billion total assets
• $4.84 billion net assets
• $590 million underlying PBT excluding property revaluations/AASB 16 impacts
• $694 million operating cash flow

The following half-year was also strong, with reported PBT of approximately $466 million and underlying PBT around $373 million, up roughly 20%.

Yet if HVN were trading around $4.60–$4.70, approximately 1.25 billion shares would put the company's equity market value at only around $5.7–$5.9 billion.

That's the part I find interesting.

You have a company worth roughly $5.8B on the market containing a reported freehold property portfolio of around $4.5B — plus the Australian franchise operation, international retail businesses and other assets.

Obviously you can't simply subtract property value from market cap. There is debt, working capital, tax, lease obligations and plenty of other considerations.

But it raises an interesting private-equity question.

Hypothetical takeover

At $6.00/share, the equity purchase price would be roughly $7.5B.

At $6.25, roughly $7.8B.

At $6.50, roughly $8.1B.

A PE consortium wouldn't necessarily finance the entire acquisition with equity. There could theoretically be acquisition debt, institutional co-investment, existing shareholder rollover and potentially property-related financing/restructuring.

The property is what makes the thought experiment particularly interesting.

Could an acquirer eventually separate some of the property from RetailCo, establish long-term leases and have institutional property investors own part of the real estate?

You'd potentially end up with:

PropertyCo: billions of dollars of commercial property and rental income.

RetailCo: Harvey Norman's Australian franchise operation, international businesses, brands and digital operations.

The obvious obstacle is the shareholder structure. A hostile takeover would appear extremely difficult given the size of the major holdings.

So perhaps the more realistic hypothetical isn't a hostile takeover at all.

Friendly privatisation + major shareholder rollover + PE/institutional capital + property restructuring.

There's also Harvey Norman's existing share-buyback program to consider. If the company continues cancelling shares while major shareholders retain their holdings, their percentage ownership can increase without them buying additional shares.

I'm not saying HVN is worth $6.50, $7 or $8.

I'm asking whether the current corporate structure could be hiding considerably more value than the market is presently recognising.

For anyone familiar with Australian M&A/private equity/property: where does this thesis fall apart?

Is the property harder to monetise than it appears?

Would RetailCo be worth substantially less once separated from its owned property?

Is the shareholder structure effectively insurmountable?

Or is HVN becoming a genuinely interesting potential public-to-private candidate at the right price?