JB Hi-Fi Acquires The Good Guys for $870 Million

By Julian Thumm | 13 Sep 2016

After significant speculation, JB Hi-Fi has finally closed a deal to acquire The Good Guys for $870 million, significantly boosting its online capabilities.

It’s been a long time in the works, but electronics retailer JB Hi-Fi has finally reached an agreement to acquire The Good Guys for $870 million, launching it into the higher margin home appliance and whitegood categories.

The acquisition will be funded through a combination of existing debt facilities plus a new $450 million debt facility. The company will also launch a $394 million capital raise to help fund the acquisition.

The acquisition will position JB Hi-Fi as Australia’s largest whitegoods and appliances retailer, ahead of Harvey Norman.

JB has been working to expand its footprint in the home appliance category, aggressively rolling out its JB Hi-Fi Home stores over the past year, but has struggled to make significant headway into the fiercely competitive field. The acquisition will provide it a sizeable launchpad to take market share in the lucrative whitegoods and appliances categories.

Combining the two businesses will create significant strategic opportunities for JB Hi-Fi, allowing it to grow its market share in complementary categories, increase its store rollout and substantially expand its customer database.

The acquisition will provide JB Hi-Fi increased scale to optimise its supply chain and leverage the value from the two brands’ combined investment in digital assets.

It will add significant scale to JB Hi-Fi’s existing online offering. JB Hi-Fi’s FY2016 online sales accounted for 3 percent of total sales, at $119 million. The acquisition will boost the combined group’s online sales to $231 million, or 4 percent of total sales.

Source: JB Hi-Fi

Source: JB Hi-Fi

“The Good Guys is a high quality Australian retailer with an excellent track record,” said JB Hi-Fi CEO Richard Murray.

“The acquisition is a very attractive 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.”

The Good Guys CEO, Michael Ford, will continue to lead the retailer under JB Hi-Fi’s ownership.

“We are very pleased to welcome Michael and his executive team and look forward to working together to create a market leading consumer electronics and home appliance retail group,” said Murray.

JB Hi-Fi will maintain The Good Guys brand and head office, while using independent dual-branded go-to-market strategies for the two brands to ease the integration. The company has no plans to close any existing stores.

The company is forecasting integration costs of $10-$12 million over the 12 months following completion of the acquisition.

JB Hi-Fi expects the acquisition to deliver net synergies of $15-$20 million per annum after a three-year integration period, and boost earnings per share by 11.6 percent before transaction and implementation costs.

The Good Guys was founded in 1952 as Mighty Muirs. The Good Guys’ current owner, Andrew Muir — whose father founded Mighty Muirs — has been eyeing a trade sale or potential IPO for a while now. While JB Hi-Fi has been the favourite to secure the acquisition, other retailers expressed interest, including Harvey Norman and South African retail group Steinhoff International.

The acquisition is scheduled for completion in late 2016 or early 2017, pending closing conditions for a transaction of this size and scale, including obtaining consents relating to leases of The Good Guys.