A timeline of the key announcements reported by Appliance Retailer on one of the biggest retail stories of 2016.

 

March 11: Steinhoff in talks with The Good Guys

The South African-based retailer Steinhoff International and The Good Guys are believed to be in serious talks re a purchase of the company. Steinhoff owns furniture chain Freedom Group, bedding chain Snooze and discount furniture retailer Poco, and according to industry sources has been underwriting the buy-back of the The Good Guys joint-venture stores since the retailer announced the scheme in late 2015.

 

May 19: JB Hi-Fi releases ASX statement around speculation

JB Hi-Fi confirms that it is in preliminary discussions with The Good Guys in relation to a proposed sales of The Good Guys. “At this stage, discussions between JB Hi-Fi and The Good Guys are preliminary and exploratory in nature. JB Hi-Fi has made no decision and nor has it entered into any agreement with respect to the acquisition of The Good Guys.”

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May 23: Joint Lead Managers appointed to support IPO

Credit Suisse, Goldman Sachs and UBS are the Joint Lead Managers to support the Good Guys (TGG) planned initial public offer and listing on the Australian Securities Exchange. They will work alongside Helfen Corporate Advisory as independent financial adviser. The company said that it will also consider any alternate ownership proposals that emerge.

 

May 23: ACCC concerned about competition

The Australia Competition and Consumer Commission (ACCC) chairman, Rod Sims has indicated that there may be an issue of competitive balance if the number of major players in the Australian consumer electronics industry was reduced from three to two. This followed the disclosure last week that JB Hi Fi was in early exploratory talks to buy The Good Guys (TGG).

“Clearly, if it (JB Hi-Fi’s acquisition of The Good Guys) came our way we would have a close look at it, these are two quite close competitors,” Sims said. “We always understand of course the best acquisition you can make is of your closest competitor because you not only gain the synergy, but also reduce competition and get some increased price gains and that is of course why we are here.’’

 

May 27: ACCC takes a closer look

The ACCC posted a notice on its public register signalling a review of a possible $800 million takeover of The Good Guys by JB Hi-Fi.

It said it was aware of media speculation concerning this possible acquisition and is currently monitoring it. A public review will be commenced once the parties provide a submission.

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May 27: Family feud leaves Gerry out of the picture

Gerry Harvey is hedging his bets when it comes to making a bid for The Good Guys. He told AR he had not received an information memorandum and wondered if a family feud with The Good Guys might prevent any deal going through.

“The feud that goes back 20 years or more when I replaced Ian Muir as chairman of NARTA so maybe the family feud is continuing through the generations,” he said. Harvey was not optimistic about his chances of getting The Good Guys describing them to AR as “not very good at all”.

 

June 6: Another buyer for The Good Guys?

Global private equity firm Blackstone emerged as a potential suitor for The Good Guys, and remains a potential buyer for the Masters and the Home Timber and Hardware businesses from Woolworths, according to a report in The Australian.

Sources say executives at the private equity firm expressed their interest in an acquisition before the sales process was launched. Rival buyout firm Bain Capital is no longer thought to be in contention for the network of 100 stores, half of which are owned by chairman Andrew Muir and his family.

 

June 10: An initial public offer (IPO) or buyout?

This was the question directed at The Good Guys, CEO Michael Ford by Appliance Retailer at an Australia-Israel Chamber of Commerce lunch in Sydney.

Ford was clear: “IPO – we’d like that. The reason for the IPO is to raise capital to roll out more stores throughout the country and a strong focus is in New South Wales. We own 44 of our stores and the balanced are franchised and we expect to complete the buyout of the remaining stores by July 1.”

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June 17: ACCC seeks outsider opinion

The Australian Competition and Consumer Commission (ACCC) is seeking views on the proposed acquisition of The Good Guys by JB Hi-Fi. The ACCC’s investigation is focused on the impact on competition.

 

July 18: Bids come in

It was reported that JB Hi-Fi, Steinhoff and Tata of India are competing for The Good Guys business after indicative bids closed. The company is up for sale through Helfen Corporate Advisory and Bank of America Merrill Lynch, while UBS, Credit Suisse and Goldman Sachs are joint lead managers.

 

July 22: The Good Guys kicks off roadshow

The Good Guys confirmed with Appliance Retailer that it would commence an international non-deal roadshow. The company visited prospective investors in London, the US and Asia over a two-week period.The roadshow kicked off less than one week after JB Hi-Fi and Steinhoff International submitted offers.

 

July 22: JB Hi-Fi reaffirms position

JB Hi-Fi CEO Richard Murray has re-affirmed his position on the potential acquisition of The Good Guys (ASX statement released on May 19). Speaking with Appliance Retailer, Murray said that he did not want to “comment on market rumour” that has circulated this week. He did not confirm the company’s bid or its speculated value of $850 million.

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August 11: ACCC will not oppose acquisition

The Australian Competition and Consumer Commission (ACCC) confirms that it will not oppose JB Hi-Fi’s proposed acquisition of the Good Guys.

Based on extensive market feedback and other industry information, the ACCC concluded that JB Hi-Fi and the Good Guys focus on different product categories and customers. The ACCC also found that post-acquisition, customers would have a range of alternative retailers of home appliances and consumer electronics.

 

August 12: JB Hi-Fi confirms deal is still on the table

JB Hi-Fi has confirmed to shareholders that it continues to participate in the sale process of The Good Guys but has no made no decision and nor has it entered into any agreement with respect to an acquisition. The statement followed the decision by the ACCC not to oppose the deal between the two retailers.

 

August 12: Gerry Harvey responds to speculation

The prospect of JB Hi-Fi as a bigger competitor does not concern Harvey Norman chairman, Gerry Harvey. Harvey was responding to the decision by the Australian Competition and Consumer Commission (ACCC) not to oppose the proposed acquisition of The Good Guys by JB Hi-Fi.

“Quite frankly it does not worry me at all,” Harvey told Appliance Retailer. “Why would I care if it is under one owner or two owners? As far as I am concerned I am quite happy for JB Hi-Fi to purchase The Good Guys and I have no issue with it whatsoever.”

 

September 13: JB Hi-Fi acquires The Good Guys

JB Hi-Fi purchased 100% of The Good Guys for total cash consideration of $870 million. The retailers will continue to operate as independent brands with their own consumer propositions and price promises. Michael Ford remains CEO of The Good Guys, reporting to Richard Murray, and The Good Guys Support Centre remains based at Essendon Fields.

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September 14: Retailers and suppliers respond

Winning Group CEO John Winning:

“JB Hi-Fi’s decision to acquire The Good Guys will create a more competitive playing field, especially for the smaller family businesses, like what we were five or ten years ago. As The Good Guys will continue to operate as its own brand, there is no real change in the customer offering. Bigger doesn’t necessarily mean better, you only need to look at the supermarket and hardware sectors as an example.”

Leading Appliances national group manager, Nicholas Fry:

“It certainly changes the dynamic of our industry, and it will be very interesting to see how the merger plays out, for both businesses, and for suppliers and consumers. It’s early days yet, of course, but there may be wider implications for the industry as a whole with two major players merging together. I think there remains sufficient competition and opportunity within our sector for retailers, suppliers and consumers to continue to be serviced exceptionally well, with plenty of choice available to them.”

BSH general manager of category development, Nick Ruffell:

“BSH has strong trading partnerships with both The Good Guys and JB Hi-Fi. We will continue working closely with all our valued partners in order to add value to our consumers.”

Smeg general manager of sales and marketing, Jim Kalotheos:

“Both JB Hi-Fi and The Good Guys have done an amazing job in building big retail brands. Ultimately, consumers will decide on the success of the new venture and we wish both businesses well.”

Shriro general manager of retail appliances, Craig Handley:

“I am pleased that Good Guys ownership will remain with an iconic Australian company rather than an offshore entity. As a supplier I welcome and support the enhanced retail expertise that this merger brings, and look forward to continuing our valuable relationship.”

 

September 14: Key business risks

In a presentation to investors, JB Hi-Fi (JB) outlined key risks associated with its acquisition of The Good Guys (TGG).

  • Information provided by TGG was incomplete, inaccurate or unreliable
  • Financial, operational, business analysis are inaccurate or not realised in due course
  • Actual synergies may be less than expected or delayed, or they may not materialise at all
  • The future growth of TGG business will depend, in part, on securing appropriate properties for new stores; therefore, there is risk that TGG will underperform future expected growth
  • Potential liabilities assumed by JB were not identified as part of the due diligence review in relation to the acquisition, or the scope of potential liabilities were not fully accounted for

 

September 16: JB Hi-Fi shares jump 7%

JB Hi-Fi shares soared by 7%, reaching $30.77 following its trading halt due to The Good Guys acquisition announcement. Fat Prophets head of research, Greg Smith told Appliance Retailer the jump in share price is a positive early sign for JB Hi-Fi.

“It indicates market support for a transformational deal that will create a new serious player in the retail industry. Both retailers have a good track record and well-managed business, although it is early days to predict how the integration will progress and play out.”

JB Hi-Fi also announced the successful completion of the institutional component of its fully underwritten 1 for 6.60 entitlement offer of new JB Hi-Fi shares at an offer price of $26.20 per new share. The institutional component has raised $259 million, attracting strong demand with approximately 94% take-up by eligible shareholders.

 

September 19: Roy Morgan insight

Roy Morgan Research considered what the takeover could mean for the retail sector, and in particular, Harvey Norman.

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Key findings including:

  • In the 12 months to June 2016, over 3 million Australian consumers made at least one purchase from JB Hi-Fi in an average four weeks. Over a million made at least one purchase from The Good Guys, while Harvey Norman attracted nearly 1.3 million customers.
  • The Good Guys has triumphed in the Furniture/Electrical Store category of the Roy Morgan Customer Satisfaction Awards every month this year and JB Hi-Fi has been close behind in second place, while Harvey Norman sits around fourth place.
  • JB Hi-Fi customers are from the highest-earning households, with a mean household income of $115,000. Harvey Norman shoppers come in at second spot with households with a mean income of $107,000, followed by The Good Guys customers at $98,000.
  • Harvey Norman customers have a mean age of 50 years, ahead of The Good Guys, who average 49 years, while JB Hi-F customers have an average age of 40.

 

October 28: JB Hi-Fi provides acquisition update

JB Hi-Fi CEO, Richard Murray said, “We have commenced integration planning while remaining focused on Christmas trading. We are pleased with the progress made to date and as part of our integration planning we have considered the necessary resources to support the expanded group.

“Further to my appointment as group CEO, Cameron Trainor, currently JB Hi-Fi merchandising director, will be appointed CEO of JB Hi-Fi and Michael Ford will continue as CEO of The Good Guys.”

 

November 28: Deal completed

JB Hi-Fi completed its acquisition of The Good Guys.

Group CEO, Richard Murray said, “We are very pleased to have successfully completed the acquisition of The Good Guys and are excited about creating a market leading consumer electronics and home appliance retail group.”