City Chic (ASX:CCX) shares jump on UK plus-size acquisition

Summary

  • City Chic Collective is acquiring Evan from Arcadia Group, which is in administration. 
  • The transaction is consistent with the strategy to expand the digital customer base across the global plus-size market.  

City Chic Collective Limited (ASX:CCX) has entered into a binding asset purchase agreement to acquire a leading UK plus-size brand Evans. 

Arcadia Group, the parent company of Evans, has entered into administration. City Chic Collective has agreed to buy eCommerce business, wholesale business and Evans brand.

Australian plus-size retailer would pay £23.1 million (A$41 million) in cash for agreed assets and brand. Evans is a well-known brand in the UK with a history of 90 years. 

Source: CCX Presentation, 21 December 2020

It is not acquiring Evans stores and franchisee business. In the 12 months to August 2020, Evans clocked 19 million annual website visits, indicating a strong and loyal customer base. 

After the payment of cash consideration, the transaction is expected to complete on 23 December 2020. 

Chief Executive Phil Ryan said Evans provides a solid base in new geography. The transaction is consistent with the objective to acquire digital customers in the plus-size apparel market.

He also said that they are confident of deploying City Chic’s operating model to drive revenues and deliver cost efficiencies. 

City Chic has a provision of transitional services arrangement with Evans eCommerce business that would run until April 2021. 

Source: CCX Presentation, 21 December 2020

Evans website reported sales of £23 million while wholesale business delivered sale of £3 million. Before the pandemic, Evans Group generated the sale of over £60 million, including stores and franchise. 

Its store footprint has been declining as customers continue to embrace digital channels. City Chic is funding the acquisition through its cash balance, which was A$121 million as of 30 November 2020. 

The company’s A$40 million debt facility remains undrawn. It estimates a proforma cash balance of A$75.3 million after the payment of consideration and related costs. 

At the time of writing, CCX was trading at $3.62, up by ~14% against the previous close.

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