Super Retail Group plans to open more than 50 new stores and expand into the leisure retail market after agreeing to buy sports goods retailer Rebel Group from private equity firm Archer Capital for $610 million.
Super Retail, which owns retail chains Supercheap Auto, BCF and Ray’s Outdoors, will sell $334 million in new shares in a nine for 19 pro rata entitlement offer and increase its debt facilities to fund the takeover.
Managing director Peter Birtles announced the decision on Monday and said Rebel was a market leader in the Australian sporting goods sector with 128 stores and about 24 per cent of market share.
“There is a significant potential opportunity to grow Rebel from 128 stores today to a total of 185 stores over the medium term, across both the Rebel and Amart banners,” Mr Birtles said.
Super Retail’s acquisition comprises 90 Rebel Sport stores, 36 Amart stores and two Performance Sports stores.
It comes as the group looks to establish itself as the leading retailer of automotive and leisure products in the Australian market.
The new shares will be sold at $5.34 each, an 18 per cent discount to Super Retail’s last trading price of $6.50.
The takeover would increase earnings per share by a mid-single digit percentage in financial 2012 before cost savings and is expected to be completed on October 31.
Mr Birtles said there was a natural fit between the businesses as Rebel would strengthen Super Retail’s leisure and apparel offering, while Super Retail could provide the expertise to accelerate Rebel’s growth and store rollout.
“The acquisition represents a fantastic opportunity for the group to leverage its retail and supply expertise in a highly complementary business and to build Rebel’s position as the national leader in sporting goods retailing,” Mr Birtles said.
Rebel’s revenue in financial 2011 was $603 million and earnings before interest, tax, depreciation and amortisation was $77 million.
Super Retail said the takeover was likely to meet a return on capital hurdle of 20 per cent in five years.
The group also intends to maintain Rebel as a separate division known as Sports Retailing based in Sydney.
It says it will seek to derive supply chain efficiencies through leveraging the expertise and capabilities of the combined businesses.
In August the Super Retail Group reported a 46.1 increase in profit to $55.6 million, up from $38.05 million the previous financial year.
The group opened nine new BCF stores and 12 new Ray’s Outdoors stores during the 2010/2011 financial year, bringing total store numbers to 78 and 50 respectively.
Super Retail shares were placed in a trading halt on Monday.
