Super Cheap Auto Group Limited (SUL) today announced that it has entered into an agreement to acquire Ray’s Outdoors, a leading outdoor leisure retailer. Super Cheap Auto Group has agreed to pay $54.0 million for the business, representing a multiple of 7.2x EV / FY2011 forecast EBIT. The transaction will be funded through equity issuance, comprising a fully underwritten institutional placement and a non-underwritten share purchase plan. The transaction is expected to be EPS accretive in FY2011, growing to high single digit accretion in FY2012 (based on consensus broker estimates).
Ray’s Outdoors has a broad camping and leisure offering with a network of 38 stores operating in 5 states. Ray’s Outdoors, which has been in operation for over 50 years, has a number of privately branded product ranges, such as Wild Country, Outdoor Expedition and Classic Outdoor, specifically designed for Australian conditions.
Managing Director, Peter Birtles, said “Ray’s Outdoors will be merged with the BCF Boating Camping and Fishing business to create a market leading Australian Outdoor Leisure Retailer with two distinct brands, operating 103 stores with combined annualised sales of approximately $400 million. Over time, we believe there is capacity to grow the network to 160 stores across Australia and New Zealand with approximately $600 million of sales. BCF and Ray’s Outdoors are highly complementary brands: BCF provides a deep, destination style offering for the outdoor enthusiast, while Ray’s Outdoors provides a broad outdoor leisure and lifestyle offering for a wider range of consumers. Ray’s Outdoors will extend our offering into a number of new categories, including apparel and outdoor furniture”.
Super Cheap Auto Group expects to be able to provide the capital and expertise to accelerate Ray’s Outdoors’ growth and store roll out. In addition, Super Cheap Auto Group anticipates a range of synergies with the broader Company, including in procurement, supply chain, marketing, operations management, administrative functions and senior management. Under the transaction, the acquisition consideration of $54.0 million will comprise $52.5 million of cash and $1.5 million of shares (to be issued at completion based on a 30 day VWAP pre-completion). Super Cheap Auto Group will acquire a newly formed company owning identified assets and liabilities of the Ray’s Outdoors business. The transaction is subject to limited conditions and, accordingly, the Company expects the acquisition to complete by the end of May 2010. From a working capital perspective, in addition to inventory, Super Cheap Auto Group will assume obligations to discharge a fixed $7.5 million of trade creditors 2. The founder of Ray’s Outdoors, Mr Ray Frost, has entered into a two year consultancy agreement with Super Cheap Auto Group to ensure continuity, and has entered into certain “non-compete” covenants.
www.supercheapautogroup.com
