JB Hi Fi ToPay $870M, For The Good Guys To Be Run As Seperate Operation
JB Hi Fi today confirmed that they have acquired 100% of The Good Guys for total cash consideration of $870 million.
The purchase price is below what analysts were tipping what was needed to acquire the appliance retailer.
In a statement issued to the stock exchange today JB Hi Fi management said that The Good Guys and JB Hi-Fi have highly complementary customer bases and product offerings
and the acquisition strengthens JB Hi-Fi’s presence in the home appliances market.
Each brand will have the support of the businesses’ combined best-in-class practices whilst maintaining independent go-to-market strategies.
Strong strategic fit expected to deliver net synergies of $15 – 20 million per annum to the combined business after a three-year integration period, excluding one-off implementation costs.
Acquisition will be funded through a combination of a fully underwritten, pro-rata, accelerated, renounceable entitlement offers with retail entitlements trading of approximately $394 million and $500 million from new and existing debt facilities.
The statement went on to say JB Hi-Fi Limited has entered into a binding agreement to acquire The Good Guys for total cash consideration of $870 million, subject to certain purchase price adjustments at completion (including for working capital) (“Acquisition”). The Acquisition will be funded through a 1 for 6.60 fully underwritten, pro-rata, accelerated, renounceable entitlement offers of approximately $394 million (“Entitlement Offer”) with the balance funded through a combination of existing debt facilities plus a $450 million new multitranche acquisition debt facility.
The Good Guys is a leading retailer of home appliances and consumer electronics to the Australian market. Founded in 1952 and originally operating as Mighty Muirs, the company has subsequently grown into a network of 101 stores across Australia.
For the 12 months ended 30 June 2016, The Good Guys generated $2.09 billion in revenue and $74.2 million in EBITDA.
The acquisition of The Good Guys creates a best-in-class retailing combination with a strong strategic rationale:
The Good Guys enjoys a strong market position in the $4.6 billion home appliances category. The Good Guys and JB Hi-Fi also share close alignment in their customer value proposition by focusing on
everyday low prices and an exciting customer experience.
The Acquisition will increase JB Hi-Fi’s footprint to a total combined 2955 stores in Australia and New
Zealand and enhance JB Hi-Fi’s growth platform through the opportunity to open new The Good Guys stores in currently underrepresented catchment areas. The acquisition will also provide JB Hi-Fi increased scale to optimise its supply chain and leverage the value from JB Hi-Fi and The Good Guys’ combined investment in digital assets over time.
JB Hi-Fi CEO, Richard Murray, said “The Good Guys is a high quality Australian retailer with an excellent track record. We are very impressed by what the owners and management have achieved with the business since its establishment and the leading market position they have created.”
“The acquisition is a very attractive strategic opportunity for JB Hi-Fi since The Good Guys is a highly complementary business which is aligned with our management philosophy and significantly enhances
our offering in the $4.6 billion home appliances market.”
“Importantly, Michael Ford, CEO of The Good Guys, has agreed to continue his leadership of The Good Guys under JB Hi-Fi ownership. We are very pleased to welcome Michael and his executive team and look forward to working together to create a market leading consumer electronics and home appliance retail group.”
Each brand will have the support of the businesses’ combined best-in-class practices whilst maintaining independent go-to-market strategies. As a result, each business will maintain independent support offices.
JB Hi-Fi management estimates that the Acquisition will deliver net synergies of $15 – 20 million per annum to the combined business after a three-year integration period, excluding one-off implementation costs. These synergies are expected to be generated from a combination of buying synergies, logistics and supply chain efficiencies, procurement synergies and support function efficiencies.
Implementation costs are expected to be approximately $10 – 12 million primarily in the first 12 months’ post-completion, including one-off costs associated with the corporatisation of The Good Guys and Joint Venture Partners.