Headline Group (HLD) has acquired for $8.8M (plus contingent liabilities of $1M) the operating assets of the Babies Galore business, and will take over up to 13 of the Babies Galore stores that historically have generated approximately $35M in revenue. The assets acquired in the transaction are inventory, and store fixtures and fittings. In addition, HLD will access the 70,000 strong customer database and the Babies Galore online technology assets.
The acquisition of the Babies Galore assets accelerates the rollout of the Mothercare and Early Learning Centre brands to a national footprint in Australia. HLD will invest to re-fit the Babies Galore stores it acquires, and will convert the majority of these locations to Mothercare parenting centres over the next 18 months. Mothercare’s exclusive product range will be introduced to the stores as they are converted. The positive margin impact of introducing the higher margin Mothercare product will be earned once the stores have been rebranded. This transaction will take HLD to an estimated annual turnover run rate of between $90M and $100M for this 2010/11 financial year. This results in HLD (trading as Mothercare Australia) becoming a leading player in the specialist parent and baby retail category.
The HLD board believes MFC will add significant value as a strategic investor and board representative. HLD will benefit from MFC’s extensive retail management experience and property expertise in the retail sector. The Babies Galore asset acquisition accelerates the expansion of Mothercare and Early Learning Centre to a national footprint. The transaction enables Mothercare to quickly position itself as a leading player in Australia. We will anticipate revenue to accelerate beyond $100 Million in the following financial year as a result of the acquisition, and the Mothercare new store openings.
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