Jb Hi-fi Limited · ASX:JBH
Jb Hi-fi — Merger or Acquisition (September 2016)
42 slides from Jb Hi-fi's merger presentation, Sep 13, 2016
Slide 1: Acquisition of The Good Guys
For personal use only Acquisition of The Good Guys 13 September 2016 Not for distribution or release in the United States
Slide 2: Important notice and disclaimer
Important notice and disclaimer For personal use only The following notice and disclaimer applies to this investor presentation (“Presentation”) and you are therefore advised to read this carefully before reading or making any other use of this Presentation or any information contained in this Prese
Slide 3: Important notice and disclaimer (continued)
Important notice and disclaimer (continued) For personal use only Investment risk All investment in JB Hi-Fi shares is subject to known and unknown risks, some of which are beyond the control of JB Hi-Fi. JB Hi-Fi does not guarantee any particular rate of return or the performance of JB Hi-Fi. Inves
Slide 4: Agenda
For personal use only Agenda 01 Insert divideroverview Transaction title 3 4 02 A Insert divider Overview of The titleGood Guys 7 6 03 A powerful combination 9 04 Transaction funding, pro forma financials and terms 18 05 Trading update and outlook 22 06 Entitlement Offer summary 24 A Key risks 27 B
Slide 5: Transaction overview
For personal use only 01 Transaction overview Not for distribution or release in the United States PAGE 4
Slide 6: Transaction overview
Transaction overview For personal use only JB Hi-Fi has agreed to purchase The Good Guys, a leading Australian retailer of home appliances and consumer electronics, for $870 million Transaction • JB Hi-Fi to acquire 100% of The Good Guys for total cash consideration of $870 million details • Implied
Slide 7: Overview of The Good Guys
For personal use only 02 Overview of The Good Guys Not for distribution or release in the United States PAGE 6
Slide 8: History of The Good Guys
History of The Good Guys For personal use only The Good Guys is a leading Australian retailer of home appliances and consumer electronics with a long and proud history as a family business since 1952 Overview Founded in 1952 as Mighty Muirs Network of 101 stores across Australia1 Significant i
Slide 9: The Good Guys financial overview
The Good Guys financial overview For personal use only The Good Guys has exhibited steady sales growth, while successfully implementing key initiatives, including corporatisation, centralisation of its order book and diversification away from consumer electronics to focus on home appliances Pro form
Slide 10: A powerful combination
For personal use only 03 A powerful combination Not for distribution or release in the United States PAGE 9
Slide 11: A best-in-class combination
A best-in-class combination For personal use only 1 Dual-branded retail combination with complementary customer bases and product offerings 2 Aligned retail management philosophies, customer value propositions and customer service orientation 3 Enhanced market share from complementary product mix, s
Slide 12: Complementary customer bases and aligned retail philosophies
Complementary customer bases and aligned retail philosophies For personal use only The Good Guys targets a core customer base of home-makers and families and uses retail philosophies that are aligned with JB Hi-Fi to promote customer loyalty Leading retailer of technology and consumer Leading retail
Slide 13: A market leader
A market leader For personal use only The Combined Group will be the market leader in both home appliances and consumer electronics Pre-transaction category share1 Post-transaction category share1 Home appliances Home appliances 26% The Good Guys 29% Combined Group JB Hi-Fi 47% Harvey Norman Harvey
Slide 14: Genuine scale in home appliances
Genuine scale in home appliances For personal use only Delivers immediate scale in the $4.6 billion home appliances category and a more diversified product mix FY16 pro forma sales FY16 sales $3.95 billion FY16 pro forma sales $6.04 billion1 $2.09 billion1 4% 14% 9% 26% 34% 82% 66% 65% Home applianc
Slide 15: Diversified store locations and formats
Diversified store locations and formats For personal use only The combination of JB Hi-Fi and The Good Guys has 280 stores in Australia, plus 15 JB Hi-Fi stores in New Zealand, with a balance of location and store format profiles across shopping centre and CBD locations, homemaker centres, and stand
Slide 16: Continued store roll-out opportunities
Continued store roll-out opportunities For personal use only Combined store portfolio of 2951 stores across Australia and New Zealand with opportunities for continuation of the roll-out There are opportunities to roll-out The Good Guys branded stores in under represented catchment areas JB Hi-Fi
Slide 17: Strong multi-channel customer proposition
Strong multi-channel customer proposition For personal use only The acquisition adds scale to JB Hi-Fi’s existing online customer proposition and The Goods Guys strength in home appliances adds depth to the JB Hi-Fi Solutions (commercial) offering Online FY16 online sales ($m) 4% of sales Combined
Slide 18: Meaningful synergy benefits
Meaningful synergy benefits For personal use only The acquisition of The Good Guys is expected to deliver annual net synergies of $15 - 20 million1 to the combined business after a three year integration period. One-off implementation costs are expected to be approximately $10 - 12 million primarily
Slide 19: Transaction funding, pro forma financials and terms
For personal use only 04 Transaction funding, pro forma financials and terms Not for distribution or release in the United States PAGE 18
Slide 20: Acquisition funding and terms
Acquisition funding and terms For personal use only Acquisition terms • Total cash consideration of $870 million Purchase price • Purchase price adjustment mechanism relating to movements in working capital and debt like items (if any) at completion • Fully underwritten 1 for 6.60 Entitlement Offer
Slide 21: FY16 pro forma profit and loss
FY16 pro forma profit and loss For personal use only FY16 pro forma profit and loss statement (pre-synergies and one-off costs associated with the transaction) Adjustments for Pro forma Combined $m JB Hi-Fi The Good Guys1 Acquisition Group Sales 3,954.5 2,090.2 6,044.7 EBITDA 262.1 94.4 356.5 Deprec
Slide 22: Pro forma balance sheet
Pro forma balance sheet For personal use only Pro forma balance sheet as at 30 June 2016 $m JB Hi-Fi 1 Adjustments for Acquisition2 Pro forma Combined Group Cash 51.9 51.9 Receivables 98.1 14.3 112.4 Inventory 546.4 222.5 768.9 Fixed assets 183.6 28.6 212.2 Intangibles and goodwill 85.6 913.83 999.4
Slide 23: Trading update and outlook
For personal use only 05 Trading update and outlook Not for distribution or release in the United States PAGE 22
Slide 24: Trading update and outlook
Trading update and outlook For personal use only JB Hi-Fi sales update August 2016 YTD consolidated total sales growth was +11.6% (August 2015 YTD: +7.4%) and consolidated comparable sales growth was +7.7% (August 2015 YTD: +5.7%) The closure of DSE during the second half of FY16 has contributed
Slide 25: Entitlement Offer summary
For personal use only 06 Entitlement Offer summary Not for distribution or release in the United States PAGE 24
Slide 26: Details of the Entitlement Offer
Details of the Entitlement Offer For personal use only • Fully underwritten 1 for 6.60 pro-rata, accelerated, renounceable entitlement offer with retail entitlements trading to raise approximately $394 million Offer structure and size • Approximately 15.0 million New Shares to be issued (equivalent
Slide 27: Entitlement Offer timetable
Entitlement Offer timetable For personal use only Event Date1 Trading halt and announcement of the Acquisition, Institutional Entitlement Offer opens Tuesday, 13 September 2016 Institutional Entitlement Offer closes Wednesday, 14 September 2016 Institutional shortfall bookbuild Thursday, 15 Septembe
Slide 28: A Key risks
For personal use only A Key risks Not for distribution or release in the United States PAGE 27
Slide 29: Key acquisition risks
Key acquisition risks For personal use only Risk Description Due diligence in JB Hi-Fi has undertaken a due diligence review in respect of the Acquisition. JB Hi-Fi has not been able to verify the accuracy, reliability or completeness of all the information relation to The Good provided against inde
Slide 30: Key acquisition risks (continued)
Key acquisition risks (continued) For personal use only Risk Description Warranty & indemnity JB Hi-Fi has obtained warranty and indemnity insurance to cover claims for breach of certain warranties and indemnities, including a tax indemnity and an indemnity for breach insurance of warranty, under th
Slide 31: Key acquisition risks (continued)
Key acquisition risks (continued) For personal use only Risk Description Conditions to JB Hi-Fi has entered into financing arrangements pursuant to which its banks agree to provide additional debt financing to partly fund the Acquisition, subject to the terms and drawdown of debt conditions of an am
Slide 32: Business risks
Business risks For personal use only Risk Description Competition risks The markets in which the Combined Group operates remain highly competitive and any increased competition from new and existing competitors may lead to a decline in sales and profitability. Reputation risk A decline in the high l
Slide 33: Business risks (continued)
Business risks (continued) For personal use only Risk Description Changes in regulatory Changes in the regulatory environment in which the Combined Group operates may increase compliance costs, and even (in extreme cases) affect the ability of the Combined environment Group to sell certain types of
Slide 34: General risks
General risks For personal use only Risk Description General market and The operating and financial performance of the Combined Group is influenced by a variety of general economic and business conditions, including levels of consumer share price risks spending, inflation, interest and exchange rate
Slide 35: Share and Entitlement Offer risks
Share and Entitlement Offer risks For personal use only Risk Description Risks associated with There are general risks associated with investments in equity capital such as JB Hi-Fi shares. The trading price of JB Hi-Fi shares may fluctuate with movements in equity an investment of capital markets i
Slide 36: Share and Entitlement Offer risks (continued)
Share and Entitlement Offer risks (continued) For personal use only Risk Description Underwriting risk JB Hi-Fi has entered into an underwriting agreement under which Macquarie Capital (Australia) Limited (“Macquarie”) has agreed to fully underwrite the Offer, subject to the terms and conditions of
Slide 37: Share and Entitlement Offer risks (continued)
Share and Entitlement Offer risks (continued) For personal use only Risk Description Risk of renouncing If a JB Hi-Fi shareholder is an eligible retail shareholder, and they do not take up some or all of their Entitlements under the Offer and those Entitlements are not sold or retail entitlements tr
Slide 38: B Offer jurisdictions
For personal use only B Offer jurisdictions Not for distribution or release in the United States PAGE 37
Slide 39: Offer jurisdictions
Offer jurisdictions For personal use only International Offer Restrictions This Presentation does not constitute an offer of entitlements (“Entitlements”) or New Shares in any jurisdiction in which it would be unlawful. In particular, this Presentation may not be distributed to any person, and the N
Slide 40: Offer jurisdictions (continued)
Offer jurisdictions (continued) For personal use only European Economic Area – Austria and Germany The information in this Presentation has been prepared on the basis that all offers of Entitlements and New Shares will be made pursuant to an exemption under the Directive 2003/71/EC (“Prospectus Dire
Slide 41: Offer jurisdictions (continued)
Offer jurisdictions (continued) For personal use only Hong Kong WARNING: This Presentation has not been, and will not be, registered as a prospectus under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong), nor has it been authorised by the Securi
Slide 42: Offer jurisdictions (continued)
Offer jurisdictions (continued) For personal use only Singapore Consent has not been obtained for the circulation of this Presentation as a public offer within the Republic of Singapore under the Securities and Futures Act (Chap 289) of Singapore (the “SFA”). This Presentation and any other material