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JB HI-FI (ASX: JBH) will buy electronics and whitegoods retailer The Good Guys for $870 million in cash.
The purchase brings together two of Australia's largest electronics retailers and accelerates JB Hi-Fi's move into the whitegoods market.
JB Hi-Fi CEO, Richard Murray, says, "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."
The purchase will be partly funded by a $394 million retail and institutional capital raising venture, where existing JB HI-FI shareholders will be able to buy one new share per 6.60 existing shares at a price of $26.20 each. A total of 15 million new shares will be issued.
The remaining $500 million will be funded through new and existing debt facilities.
The transaction is expected to complete late this year, or early 2017.
The Good Guys, founded in 1952, has a network of 101 stores across Australia. In the 12 months to 30 June, the business had $2.09 billion revenue and an EBIT of $74.2 million.
The entire home appliances category is worth $4.6 billion annually, making the Good Guys a clear market leader in this area. JB Hi-Fi had already made a move into this market, under the JB Hi-Fi Home brand.
The Good Guys CEO, Michael Ford, will continue in the role under the new ownership, alongside the existing management of the business.
It is expected the acquisition will deliver net synergies of $15-20 million over the three-year integration period through buying, logistics and supply chain efficiencies.
Costs associated with bringing the two businesses together will be between $10-12 million in the first year post completion.
As part of the announcement, JB Hi-Fi also said it had cancelled its share buyback plan announced on 15 August 2016.
JB Hi-Fi shares are in a trading halt this morning, as a result of the announcement. Shares are expected to return to trade on 16 August.
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