Michael Hill (ASX: MHJ) has announced it is acquiring Bevilles Jewellers in a $45 million all-cash deal that will bolster its local store presence and increase total sales of gold and silver jewellery.
The buyout will grow Michael Hill’s Australian store footprint from 148 to 174, and give Bevilles the opportunity to expand into markets like New Zealand and Canada, where the suitor already has 47 and 86 stores respectively.
The takeover is immediately earnings per share accretive, adding about $7 million to $8 billion of EBITDA to Michael Hill’s business, and between $60 million to $65 million in sales.
The news comes almost a month after Michael Hill posted record sales for the first half of the financial year, with revenue increasing 11 per cent year-on-year to hit $363.4 million while gross profit rose from $213 million to $237 million.
“Bevilles is a highly profitable business, with clearly defined market positioning and a talented and highly capable team,” Michael Hill CEO and managing director Daniel Bracken said.
“We see meaningful growth potential and EBITDA enhancement opportunities embedded within the business, which we will unlock in the short to medium term, and the transaction is expected to be immediately EPS accretive.
“Expanding the store network in Australia represents an extremely exciting opportunity for the group, as the Michael Hill brand continues its journey to elevate into a more premium positioning. I’m looking forward to our two teams working together to deliver the group strategy.”
Founded in 1934, Bevilles is a family-owned jewellery and watch retailer based in Melbourne with 26 stores across VIC, NSW and SA. Nine years ago, a material restructure helped the company achieve notable growth and profitability, which was underpinned by the opening of nine new brick-and-mortar stores since 2018.
The Bevilles sales mix comprises 39 per cent diamonds, 27 per cent gold, 21 per cent watches and 12 per cent silver – a welcome change of pace for Michael Hill, which sees 73 per cent of earnings come from the sale of diamonds alone. Bevilles also has a loyalty membership program, which has accounted for 88 per cent of sales over the last 12 months.
Bevilles CEO Michelle Stanton has agreed to stay on in a two-year ambassadorial arrangement. As part of the takeover, Bevilles' employees will be offered new employment contracts with Michael Hill.
Michael Hill noted the acquisition provided a significant runway to achieve 80 to 100 Bevilles stores by FY28, as well as further expansion opportunities in New Zealand and Canada.
“The entire board are extremely pleased with the strategic acquisition of Bevilles. As Michael Hill continues on its brand elevation journey, this transaction provides the perfect complementary brand to expand our addressable market,” Michael Hill chair Robert Fyfe said.
“It ticks so many boxes especially in the current economic environment as customers seek out value for money.
“The Bevilles store network is under-penetrated and ready for growth, and the Michael Hill team will partner with Bevilles to provide expertise to grow the store portfolio, and unlock synergies.”
The acquisition is expected to complete in Q2 CY2023 subject to satisfaction of regulatory conditions, including approvals from the Australian Competition & Consumer Commission (ACCC) and Fair Work Commission.
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