Super Cheap Auto Group is to expand deeper into the outdoor leisure sector with the $54 million purchase of rival operator, Ray’s Outdoors.
Super Cheap, which went into a trading halt yesterday, revealed the deal in a statement to the ASX of an $86 million fund raising.
Super Cheap is buying Ray’s Outdoors to give its BCF (Boating Camping Fishing) business more bulk and a greater market share.
"The company has the capital and systems to accelerate the growth of the business," Super Cheap CEO, Peter Birtles said in the statement.
He said Ray’s Outdoors, which has current annual sales of around $130 million, will be merged with the BCF Boating Camping and Fishing business to create a market leading Australian Outdoor Leisure Retailer with two distinct brands, operating 103 stores with combined annualised sales of approximately $400 million.
Mr Birtles said there was the potential to grow the combined BCF/Ray’s Outdoors business to around 160 stores and $600 million in annual sales and with potential back office cost savings.
Ray’s Outdoors has a network of 38 stores in five states.
It has been in operation for over 50 years, has a number of privately branded product ranges such as Wild Country, Outdoor Expedition and Classic Outdoor, specifically designed for Australian conditions.
Super Cheap will pay for Ray’s Outdoors with $52.5 million in cash and $1.5 million in shares placed with the vendor. It expects the transaction to be completed by the end of next month.
Super Cheap said the transaction would be equity-funded with an underwritten institutional placement to raise $76 million, and a non-underwritten share purchase plan to raise another $10 million.
The placements will be at $4.80 per new share, compared with the $5.07 closing price last Friday.
The institutional side of the fund raising was expected to be completed overnight, with the company’s shares cleared for trading this morning.
Super Cheap said the extra $32 million raised by the issue will be used to "fund its capital expenditure and working capital requirements and to increase its financial flexibility".
There was a fully underwritten institutional placement of 15.9 million new shares at a price of $4.80 per share to raise $76.32 million.
Super Cheap said its major shareholder, SCA FT, "will not participate in the placement, with a view to increasing the Company’s free float. No shareholder approval is required or will be sought in relation to the institutional placement.
"Existing Super Cheap Auto Group shareholders with a registered address in Australia and New Zealand on the record date for the SPP (30 April 2010) will have the opportunity to acquire up to approximately $10,000 worth of new shares at a price of $4.80 per share under a non-underwritten share purchase plan.
"If applications for new shares under the SPP exceed $10 million, the Company may, in its absolute discretion, undertake a scaleback to the extent and in the manner it sees fit."
