JB Hi-Fi announces Good Guys takeover worth $870m

JB Hi-Fi's chief executive Richard Murray said the acquisition accelerates his company's push into the whitegoods sector.

JB Hi-Fi has entered an agreement to buy whitegoods retailer The Good Guys for $870 million.

A JB Hi-Fi deal with the Good Guys would form a business with sales of nearly $6 billion and nearly 300 stores.

JB Hi-Fi plans to open up new The Good Guys branded stores in "under represented catchment areas". The acquisition is expected to be completed by this year or early next year.

The electronics retailer says the two chains have "highly complementary customer bases and product offerings" and the deal strengthens JB Hi-Fi's presence in the A$4.6 billion home appliances market. "We are very pleased to welcome Michael and his executive team, and looking forward to working together to create a market-leading consumer electronics and home appliance retail group", he said.

Ford had previously expressed a preference for a share market float over a sale to JB Hi-Fi.

The two stores will maintain their separate brands and support offices.

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Michael Ford, the well regarded chief executive of The Good Guys, had agreed to continue to lead the chain under JB Hi-Fi's ownership.

JB Hi-Fi expects the acquisition to deliver net synergies of $15-$20 million per annum after a three-year integration period, and boost earnings per share by 11.6 percent before transaction and implementation costs.

The acquisition announcement comes just weeks after the company tried to quell market speculation with a statement suggesting that, while it was in discussions with The Good Guys regarding a potential acquisition, the privately-held company was continuing to assess an IPO on the Australian Securities Exchange (ASX).

The takeover will be funded through a $349 million equity increase, along with $500 million raised from new and existing debt facilities, the Sydney Morning Herald reported.

JB Hi-Fi raked in $3.95 billion of revenue for the 2016 financial year, up 8.3 per cent from the previous year, while its big-name rival Dick Smith shut its doors.

The acquisition will make JB Hi-Fi Australia's leading whitegoods and appliances retailer, with a 29 per cent share of the $4.6 billion home appliances market, ahead of Harvey Norman's 24 per cent share.

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