Homewares and furnishings retailer Adairs (ASX: ADH) has stepped up its push into the home furniture sector through the $80 million acquisition of national retailer Focus on Furniture.
The deal comes two years after Adairs snared New Zealand-based online furniture group Mocka - a deal whose final stage of settlement for the remaining 35 per cent was brought forward in September following a strong performance by the online retailer during the pandemic.
However, Focus on Furniture is a traditional bricks-and-mortar play that adds an Australian network of 23 stores to the Adairs business.
Adairs says the acquisition, to be funded through $74 million cash and a $6 million placement of shares, will be immediately earnings accretive even without taking into account expected synergies.
Focus is a vertically integrated omni-channel furniture retailer that recorded revenue of more than $150 million in FY21.
News of the acquisition has been well received by the market where investors pushed Adairs shares more than 11 per cent higher in early trade, with the deal seen as increasing Adairs' exposure to the $8 billion bulky furniture market.
Adairs sees strong growth opportunities for the business, hinting at a possible national store expansion, online growth strategy and an extension of the Focus range.
Adairs’ group CEO Mark Ronan describes the acquisition of Focus as an ‘exciting and strategically significant development’.
“Focus builds out our product offering in the key area of home furniture and increases the exposure we have to that market by almost three times,” Ronan says.
“The Adairs group now comprises a highly profitable and aligned portfolio of brands with significant growth potential targeting the middle market in the home category in Australia and New Zealand.
“The acquisition will be earnings per share accretive from day one and we see strong growth opportunities that have the potential to drive sales of $250 million-plus over the next five years.”
Focus will continue to operate independently of Adairs, with the company’s existing management team continuing under new contracts.
“Focus is led by a highly capable leadership group, and a passionate, service-orientated team in its stores, warehouses and support office,” says Ronan.
“We are excited to welcome them to the Adairs Group family and believe that together we can continue to build a truly great business.”
The cash component of the acquisition will be funded by $74 million of new and existing debt facilities. The acquisition is due to settle on 1 December 2021.
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