Swedish clothing firm KappAhl Holding said on Monday it would offer around 7 billion Swedish crowns ($1 billion) in cash for bigger rival Lindex, aiming to broaden its store network and brand portfolio. The offer amounts to a premium of 15 percent on Lindex's closing price on Friday of 89 crowns.
"We are doing this because we have the ambition ... of being a multi-channel, European company and so we need to buy a number of chains which are independent in their own right ... and where we can achieve synergies," KappAhl Chief Executive Christian Jansson told Reuters.
He said the company was gathering strength for a European expansion. "I am not overwhelmed," said one analyst. "There seems to be quite a lot of overlap, both geographically and even in terms of target groups." A second analyst said that the 102 crowns per share offer was reasonable, but that a 15 percent premium was on the low side.
Shares in KappAhl were up 2.2 percent at 69 crowns at 0845 GMT. Lindex shares were up 16.9 percent at 104 crowns. The wider Stockholm market was up 1.8 percent. KappAhl and Lindex will remain two separate store networks, but economies of scale will lead to synergies of 150 million crowns per year, KappAhl said. KappAhl, which operates 272 stores in Sweden, Norway, Finland and Poland, said it would finance the deal through bank loans.
KappAhl had net sales of 4.4 billion crowns in the 12 month period ending May 31 and posted an operating profit of 608 million for the period. It expected the deal, if it goes through, to boost earnings per share for the accounting year 2007-2008. Lindex, which had net sales of 5.2 billion crowns in the 12 months to May 31, operates 342 stores mainly in Sweden, Norway and Finland, but also has a small number of shops in the Baltic states. Its 12-month operating profit was 436 million crowns. The offer period is expected to run from August 29 to September 21, KappAhl said.
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