Lovisa (ASX:LOV) share price rockets higher on European acquisition news

The Lovisa Holdings Ltd (ASX:LOV) share price is surging higher today after announcing the acquisition of a European competitor…
The post Lovisa (ASX:LOV) share price rockets higher on European acquisition news appeared first on Motley Fool Australia. –

M&A Letters

The Lovisa Holdings Ltd (ASX: LOV) share price has been rocketing higher on Friday morning after making an acquisition announcement.

At the time of writing the fast fashion jewellery retailer’s shares are up 15.5% to $11.59.

What did Lovisa announce?

This morning Lovisa announced the acquisition of the European retail store network of German wholesaler beeline GmbH.

This acquisition is expected to add more than 80 stores to the Lovisa global store network across six European countries.

According to the release, the beeline retail business currently operates 114 retail stores in seven countries selling fashion jewellery and accessories under the SIX and I AM brands.

Lovisa will acquire the shares of the six retail trading entities of the beeline group in Germany, Switzerland, The Netherlands, Belgium, Austria and Luxembourg, with all continuing stores to be rebranded to trade as Lovisa stores.

The shares in the six beeline entities will be acquired for a total purchase price of just 60 euros (that’s not a typo). Beeline will ensure a cash level of the entities of 9.87 million euros in aggregate, with no financial debt to be taken on as a result of this transaction.

In addition to this, Lovisa has also entered into a put option agreement in relation to the acquisition of beeline France and its store network of 30 stores.

This put option provides beeline with the option to sell the shares in beeline France to Lovisa following the completion of mandatory consultation with its employee works council in the country. The company intends to provide a further update upon successful completion of this process.

What now?

Management advised that the acquisition of each country is to be completed progressively from 1 March 2021 through to end May 2021.

The combined cash requirement for fit-out and inventory for the conversion of stores to Lovisa is expected to be less than 5 million euros.

As part of the transaction, upon completion, Lovisa will take over approximately 3 million euros of bank guarantees associated with the leases of the acquired beeline entities, as well as provide a further 3 million euros bank guarantee to the vendor to support its obligations under the share purchase agreement. These guarantees will be supported from existing credit facilities.

Lovisa’s Managing Director, Shane Fallscheer, commented: “We are very excited that this transaction gives us the opportunity to add six new countries to our global store network, and provides us with a strong base and quality team to grow the Lovisa brand further in these markets into the future as part of our ongoing global rollout strategy.”

Trading update.

Lovisa also provided investors with an update on its performance in FY 2021.

The company reminded the market that its 24 stores in France and 39 of its stores in the UK are currently temporarily closed as a result of government-imposed lockdowns.

However, the remainder of its store network has seen a continuation of the improved sales trend previously reported.

It notes that its comparable store sales for the first 19 weeks of FY 2021 are down 9.2% on the prior corresponding period. This is being driven by the continued stronger performance from those markets that have been re-opened longest and with the least restrictions in place. Australia and New Zealand continue to be its best performing regions.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Lovisa (ASX:LOV) share price rockets higher on European acquisition news appeared first on Motley Fool Australia.

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