After months of speculation, JB Hi-Fi has officially announced it will acquire whitegoods retailer The Good Guys for $870 million.
The deal will be funded by a combination of a $394 million entitlement offer and $500 million from existing debt facilities.
JB Hi-Fi will get a huge surge to its budding whitegoods business with the addition of 101 Good Guys stores in Australia, bringing its total number of locations to 295. The companies expect to net between $15 million and $20 million in net synergies per year.
JB Hi-Fi chief executive Richard Murray said that Good Guys boss Michael Ford would continue to lead the business, and that new Good Guys stores will be opened in "underrepresented catchment areas."
“The acquisition is a very attractive strategic opportunity for JB Hi-Fi since The Good Guys is a highly complementary business which is aligned with our management philosophy and significantly enhances our offering in the $4.6 billion home appliances market,” said Murray.
The Good Guys reported $2 billion in sales in the 2016 financial year, comprising of 66 percent whitegoods and 34 percent consumer electronics. The Good Guys sells a range of PCs, laptops and tablets from the likes of Apple, Samsung, HP and Lenovo.
Industry regulator The Australian Competition and Consumer Commission has already stated it wouldn't oppose the deal, saying the two businesses have enough difference in their product and customer focuses.
Speculation of an acquisition began in May despite The Good Guys continuing the process to list on the Australian Securities Exchange. At one point, Harvey Norman chairman Gerry Harvey said he was interested in buying The Good Guys, adding that he was willing to pay up to $900 million for the business.
While JB Hi-Fi has thrown its weight behind its own whitegoods business, it has also been building its enterprise services business in stealth mode with the goal of generating $500 million in revenue.
JB Hi-Fi raked in $3.95 billion in the 2016 financial year, an increase of $300 million. According to Murray, JB Hi-Fi's strong performance was underpinned by the collapse of rival Dick Smith, which also had plans to break in to whitegoods before it fell into administration.