Electronics giant JB HI-FI has bought out appliance chain, The Good Guys, for $870 million, now acquiring more than 100% of their competitor. The two will still be separate chains but work together to run both companies smoothly and hopefully to drive prices down.
The ACCC gave the all clear yesterday to merge together and work together, despite them being competitors. Another option was Harvey Norman but they had a drastic overlap.
They are funding the deal with $450 million in debt and $394 million raised from distributing 15 million new shares, both to existing shareholders and to stock exchange companies.
What comes with this deal is JB being pushed out of the National Associated Retain Traders of Australia, an industry of small retailers such as Bing Lee and Appliances Online. The two companies pushed together will give it more buying ability and have lower prices than NARTA members. After the purchase goes through, JB will own more than 300 stores across Australia and New Zealand.
JB’s sale growth has increased by 11.6% after their chief-competitor Dick Smith closed late last year. The appliance giant are expecting their profit to grow majorly, through the first half of FY17.
“The acquisition is a very attractive strategic opportunity for JB Hi-Fi since The Good Guys is a highly complementary business which is aligned with our management philosophy and significantly enhances our offering in the $4.6 billion home appliances market.” said Richard Murray, CEO of JB HI-FI.
Michael Ford, CEO of The Good Guys and Murray are excited to be working together to try and maximise their profit for both companies.