Summary
- Lovisa Holdings Limited (ASX:LOV) surprised the street with its recent acquisition of European retail store network of German wholesaler, beeline GmbH.
- The acquisition is expected to add 80+ stores across 6 European countries for Lovisa.
- The total consideration of €60will be paid towards the acquisition of all six entities of beeline, with a put option agreement to acquire beeline France which has a network of 30 stores.
- The company has estimated the cash outflow of less than €5 million towards fit-out and inventory for the conversion of stores.
- The bank guarantees worth ~€3 million will also be taken over upon completion of the acquisition, while a further €3 million of bank guarantee will be provided towards the vendors.
On 13 November 2020, Lovisa Holdings Limited (ASX:LOV) surprised the street with its recent acquisition of European retail store network of German wholesaler, beeline GmbH. The acquisition is expected to expand the company’s foothold across 6 European countries, with additional 80+ stores.
The beeline retail business has been selling fashion jewellery and accessories under the brand name of SIX, and I AM through its 114 retail stores in 7 countries.
Stock performance
The new acquisition deal surprised the investors, which consequently led to a surge of 13% to $11.36 during early trade hours on 13 November. After posting a fresh eight-month high of $11.93 in today's session, the stock has delivered a stellar performance of 60% from the November low of $7.13.
Details of the acquisition
Lovisa will be acquiring the shares of six retail trading entities of the German wholesaler in countries like Belgium, the Netherlands, Luxembourg, Germany, Austria and Switzerland. The company will be rebranding all the continuing stores under Lovisa stores.
The total consideration of €60 will be paid towards the acquisition of all six entities of beeline without taking the financial debt of the entities. The beeline GmbH also needs to ensure a cash level of the €9.87 million in aggregate of the entities.
Apart from the consideration, a put option agreement has also been entered into by the company to acquire beeline France which has a network of 30 stores. This agreement allows beeline to sell its stake in beeline France after the consultation with beeline France’s employee works council. The company has estimated the cash outflow of less than €5 million towards fit-out and inventory for the conversion of stores.
The deadline for all the acquisitions is set to be met progressively from 1 March 2021 till the end of May 2021.
The bank guarantees worth approximately €3 million will also be taken over upon completion of the acquisition and is associated with the leases of the acquired beeline entities. A further €3 million bank guarantee would be provided towards the vendors, in accordance with the share purchase Agreement, expiring on 31 March 2022. All these guarantees will be taken care of by the existing credit facilities.
Management Commentary
Managing Director of Lovisa, Shane Fallscheer is excited with the new opportunities that this acquisition presents in the future by adding up to six new countries to the existing global store network. This will ensure a strong base to grow Lovisa in these European markets as a part of the ongoing global rollout strategy.
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The company is also focused on improving e-commerce capability in these markets to complement the expansion in European store network. However, due to a high COVID-induced uncertainty, especially in the European countries, the company refrained from providing guidance regarding the contribution of this new acquisition in the FY21 earnings.
