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Electronics retailer JB Hi-Fi has struck a deal to buy rival appliances retailer The Good Guys in an $870 million deal.
The two companies announced the deal this morning following months of negotiations.
Under the conditions of the deal, The Good Guys will continue operation as an independent brand and will preserve its chief executive, Michael Ford, who will report to JB Hi-Fi’s boss Richard Murray.
“This is a fantastic opportunity for The Good Guys. 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.
JB Hi-Fi has said that 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 Good Guys is a high-quality Australian retailer with an excellent track record,” JB Hi-Fi chief executive, Richard Murray, told the ASX this morning.
“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.”
JB Hi-Fi has said that the deal had to make “compelling financial sense” for shareholders and the company made it clear that they were never going to overpay.
While JB Hi-Fi currently operates 59 Home and Kitchen appliance stores, the Good Guys presently have 100 outlets.
“The acquisition is a very attractive strategic opportunity,” Mr Murray said.
The company has said that the strong strategic fit is “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”.
The acquisition will be funded by an entitlement offer valued at around $394 million and from $500 million in new and existing debt, JB Hi-Fi said.
The Good Guys co-founder and executive chairman Andrew Muir said the company’s lead position in home appliances was matched by JB Hi-Fi’s strength in consumer electronics.
“We grew from a single store in suburban Melbourne in 1952 to the number one retailer in our core categories,” Mr Muir said in his statement.
“We are bringing together two iconic Australian retail brands that have tremendously strong and loyal customer bases.”