JB Hi-Fi to acquire New Zealand chain for $15 million

By James Wells

MELBOURNE: JB Hi-Fi has announced plans to acquire the Hill & Stewart chain of 11 consumer electrical stores in Auckland next year for $15.2 million and become the third largest retailer in New Zealand.

JB Hi-Fi will pay seven times earnings for the company which is expected to be $NZ2.5 million for the local financial year ending 31 March 2007. Based on this evaluation, the company is valued at $NZ17.5 million or $A15.2 million.
The turnover from the 11 Hill & Stewart stores is estimated at $NZ60 million ($A52.6 million).

In a statement to the Australian Stock Exchange, JB Hi-Fi said the acquisition is expected to be completed on 1 March 2007, subject to certain minimum trading expectations being achieved.

“At this date, JB will take control and consolidate 100 per cent of Hill & Stewart’s earnings for the four months to 30 June 2007. It is anticipated the acquisition will have a neutral impact on JB’s earnings per share for FY07,” the statement said.

According to JB Hi-Fi chief executive officer, Richard Uechtritz, the Hill & Stewart chain was attractive as provides the business with an opportunity to enter the New Zealand market.

“Hill & Stewart is well managed and successful company, with a great presence in Auckland nd strong relationships with suppliers.”

Hill & Stewart managing director and owner, Nigel Merrett, has confirmed he will continue in his current role with the business and will work with JB Hi-Fi to assist with the brand’s expansion in the New Zealand market.

“The company expects to open four to five JB Hi-Fi branded stores in Auckland in FY08,” the statement said.

“Agreement in principle has been reached for three JB branded stores including one in central Auckland. There is also an opportunity to expand Hill & Stewart branded stores beyond its Auckland base.”

According to Uechtritz, the New Zealand market is an attractive long term market for JB Hi-Fi.

“The New Zealand consumer electrical market is more fragmented than the Australian market,” Uechtritz said in his statement.

“We expect that the discount positioning of JB Hi-Fi will appeal to New Zealand consumers, which, together with the Hill & Stewart business will quickly propel the company to within the top three of electrical retailers in the country.”