Canadian Tire Corp. has signed an agreement to purchase The Forzani Group (FGL), Canada’s leading sporting goods retailer with 500 outlets across the country and revenues of $1.4 billion a year. The all-cash deal, in which Canadian Tire will purchase all the outstanding shares of FGL for $26.50 per share, has the support of the FDL board of directors, which is recommending to its shareholders to tender their shares to the offer. It is expected to close in the third quarter of 2011 pending regulatory approval.
In its announcement, Canadian Tire said it will gain from having access to an expanded customer base with FGL’s retail banners, including mall-based shoppers and the important 18-to-35-year-old customer segment.
More than 70% of FGL’s sales are in athletic apparel and footwear, with the balance of sales in sporting hard goods that complement Canadian Tire’s assortment with very little overlap, according to the company.
“Canadian Tire is today strengthening its credibility as Canada’s ultimate authority in sports,” said Stephen Wetmore, president and CEO of Canadian Tire. “The acquisition of retail banners like Sport Chek and Sports Experts is a natural extension of our core sports business.”
The offer is not subject to a financing condition, according to Canadian Tire. It is anticipated the $771 million acquisition (excluding FGL debt and shares already owned by Canadian Tire) will be financed with $500 million of cash on hand and the balance with short-term financing. Canadian Tire expects to return to pre-acquisition leverage levels within 18 to 24 months of closing the transaction.
Canadian Tire intends to operate the FGL retail banners as a separate business unit, similar to Mark’s and Canadian Tire Financial Services.