JB Hi-Fi (JBH) shares touched an all time yesterday of $27.52 after it received the greenlight from the Australian Competition and Consumer Commission to make a move on its smaller white goods retailing rival, The Good Guys.
The high was reached in early trading very soon after the ACCC announcement. They later eased a little to end the day up 2.1% at $27 on a day when the wider market was sold off.
Despite the tick from the ACCC, JB Hi-Fi played it straight up and down yesterday.
It has its 2015-16 full year results to announce next Monday when it will be pushed by analysts and other investors to say more. All the electronics and furniture retailer would say yesterday was that it has not yet entered into any agreement with The Good Guys and that it would only pursue an acquisition if it made “compelling” financial sense.
“JB Hi-Fi continues to participate in the sale process but has made no decision," an ASX statement from JB Hi-Fi said. The retailer said it understands The Good Guys is still considering a range of options including floating on the Australian Securities Exchange (They are).
JB Hi-Fi sells home appliances and consumer electronics. It sells predominantly consumer electronics including audio/visual goods and equipment, CDs and DVDs. JB Hi-Fi has a small market share in large home appliances.
The Good Guys is owned by the Muir family and sells home appliances as well as consumer electronics. It focusses on home appliances rather than consumer electronics, also offering kitchen design and installation services to customers.
JB Hi-Fi operates 179 stores and the Good Guys 100 stores. The ACCC said in its statement JB Hi-Fi’s proposed acquisition would not substantially reduce competition in either consumer electronics or whitegoods retailing, with Harvey Norman and Bing Lee among a raft of other companies in the markets.
Based on extensive market feedback and other industry information, the ACCC concluded that JB Hi-Fi and the Good Guys generally 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.
“JB Hi-Fi has traditionally focussed on selling consumer electronics, with stores located mostly in shopping centres or CBDs. On the other hand, the Good Guys has mostly focussed on whitegoods and other home appliances, with stores generally located in home centres or similar locations,” ACCC Chairman Rod Sims said.
Other retailers such as Harvey Norman have a much higher degree of overlap with the Good Guys than JB Hi-Fi
“However, JB Hi-Fi and the Good Guys are clearly in competition with each other to a degree. The ACCC focussed its investigation on high-value consumer electronics and home appliances, particularly televisions, where there is the greatest overlap between the Good Guys and JB Hi-Fi.”
"JB Hi-Fi has also recently opened a number of JB Hi-Fi Home stores which stock a wider range of home appliances, competing more directly with the Good Guys. The ACCC considered the potential for the JB Hi-Fi Home stores to become a larger player in non-electronics in the future.
“On balance, the ACCC did not consider that the acquisition would substantially lessen competition in any market. We considered that the combined company would continue to face strong competition from Harvey Norman and other existing retailers such as Betta, Retravision, Bing Lee and Radio Rentals,” Mr Sims said.
“For lower value and smaller items, we considered that consumers have a range of alternatives, including online suppliers and discount department stores,” Mr Sims said.
Despite that apparent ruling out Harvey Norman shares rose strongly yesterday, up 2.8% to $5.02 (they touched a high of $5.04, the peak price since 2008).
