“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”.
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I’m talking about JB Hi-Fi, which is about to get a whole lot bigger after they announced they would acquire The Good Guys for a whopping $870 million.
JB Hi-Fi shares are in a trading halt.
The balance of the acquisition will be funded through existing debt facilities and a new $450 million debt facility.
JB Hi-Fi CEO, Richard Murray, told investors that The Good Guys had an excellent track record, and that he was impressed with what it had achieved since its establishment. Last month, the Australian Competition and Consumer Commission (ACCC) gave the go-ahead for the deal, noting that it would not substantially reduce competition in either consumer electronics or whitegoods retailing.
The electronics retailer says the two chains have “highly complementary customer bases and product offerings” and the deal strengthens JB Hi-Fi’s presence in the $4.6 billion home appliances market.
The deal follows several years of negotiations between JB Hi-Fi and The Good Guy’s owner Andrew Muir, whose father founded the business in 1952 as Mighty Muirs.
The Macquarie Capital-advised JB Hi-Fi and The Good Guys finally reached agreement this week after Mr Muir abandoned plans for a $1 billion initial public offer.
JB Hi-Fi chief executive Richard Murray said The Good Guys operation would complement the electronics retailer’s current business model and allow them to move forward into a exciting and profitable new market.
“Importantly, Michael Ford, CEO of The Good Guys, has agreed to continue his leadership of the The Good Guys under JB Hi-Fi ownership”.
The two stores will maintain their separate brands and support offices. A JB Hi-Fi deal with the Good Guys would form a business with sales of nearly $6 billion and nearly 300 stores. “We will preserve the things that have made The Good Guys great, and by combining with JB Hi-Fi, we will have the scale and resources to grow the brand and realise its full potential”, Mr Ford said in a statement. Annual savings from the combination should be as much as A$20 million after three years, according to JB Hi-Fi, which has a market value of A$2.86 billion.
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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.
