Nick Scali expands into UK market with Fabb Furniture acquisition
Australian furniture retailer Nick Scali (ASX: NCK) will make its first foray into the UK market with the acquisition and re-branding of British company Anglia Home Furnishings, which trades as Fabb Furniture.
Under the terms of the deal, Nick Scali will pay a nominal cash consideration of $3.82 and an additional $6.7 million for the secured debt (minus third party debt) owed by Fabb.
Nick Scali will also pay $1m to exercise an option to exit an existing distribution centre arrangement with Fabb and provide a net working capital injection of up to $11.5m.
On completion of the transaction, Nick Scali will re-brand Fabb’s existing 21-store network to establish a regional presence in line with its UK growth strategy.
It will manage store refurbishments and new store openings and the establishment of a new distribution centre.
The Fabb network will eventually transition to the Nick Scali product range and leverage Nick Scali’s buying power and supply chain.
Geographic diversity
Nick Scali chief executive officer Anthony Scali said the acquisition – expected to be completed in mid-May – would enhance the company’s geographic diversity and scale beyond Australia and New Zealand for the first time.
“This acquisition is complementary to our existing business and provides a compelling opportunity for us to enter the large and attractive UK furniture market with access to an immediate network of stores,” he said.
“It is a unique opportunity for us to establish the Nick Scali brand at scale and at a relatively low cost in the UK.”
Mr Scali said the acquisition model would remain the same as when the company acquired sofa chain Plush in 2021 and would leverage the Nick Scali buying power, combined with supply chain and logistics capabilities to deliver significant gross margin uplift for the UK business.
Capital raising
The Fabb Furniture acquisition and additional investment will be funded by a $50m capital raising, comprising a $46m institutional placement and a $4m conditional placement to an entity associated with Mr Scali, subject to shareholder approval.
The placement will be conducted at $13.25 per share and is expected to result in the issue of 3.8 million new shares, roughly equivalent to 4.7% of the company’s total issued capital.
Nick Scali will also conduct a non-underwritten share purchase plan to raise an additional $10m.
Eligible shareholders in Australia and New Zealand will be invited to apply for up to $30,000 of new shares free of brokerage, commission and transaction costs.