B&M Regulatory News (BME)

19 October 2018

B&M European Value Retail S.A. 

Acquisition of Babou Stores Group in France

B&M European Value Retail S.A. ("B&M"), the UK's leading leading general merchandise value retailer, today announces the acquisition by its subsidiary, EV Retail Limited, of the entire issued share capital of Paminvest SAS a discount general merchandise retailer group operating with a chain of 95 stores under the trading name Babou in France (the "Babou Stores Group" or "Babou").

For the year ended 31 January 2018 the Babou Stores Group delivered Revenues of €347.1m, EBITDA of €24.7m, Profit before tax of €0.1m (after goodwill amortisation €10.7m) and had Gross Assets of €289.4m as at 31 January 2018. It operates in the discount retail sector, with c30,000 general merchandise, seasonal and textiles SKUs. Babou's stores are predominantly located at out of town sites with an average c.27,000 sq ft of retail space, compared to B&M's UK average of c.19,500 sq ft.

The total enterprise value of the transaction is €91.2m, which includes the debt of the Babou Stores Group refinanced by B&M. The consideration was paid in cash financed by an additional loan facility. There is no deferred consideration payable in relation to the transaction. The transaction was completed today.

The acquisition of the Babou Stores Group will provide a base which will enable B&M to develop and grow in France its proven and profitable value retail model. B&M's strategy for the Babou business is to apply B&M's direct product sourcing and limited assortment SKU model, while refining Babou's product offering. The average store size, location and customer base of Babou are comparable to the highly successful B&M Homestore operation in the UK. The French market, alongside the existing German and UK markets in which B&M operates, has attractive dynamics including overall market size, the popularity of the growing discount channel and the healthy operating margins achieved by several incumbent operators.

The Babou Stores Group is currently led by Thierry Morter. Mr Morter is retiring from the business as part of the transaction, and is today succeeded by Cedric Mahieu as CEO. Mr Mahieu has been employed by B&M since January 2018 in expectation of this transaction and has been working with the B&M team to develop the integration plan for Babou. The Seller of the Babou Stores Group is PIM Participations SAS, a private family owned investment company in France.

The acquisition is expected to be immediately earnings enhancing. However, the first 12 months of ownership will be a period of transition as the acquired business realigns its product offering closer to that of B&M, which will impact the level of Babou's earnings in the short term. 

At the same time as the transaction, the third party distribution services provider to the Babou Stores Group, has been acquired by the Babou Stores Group from Logitex Sarl and Terrealame which are privately owned companies in France, on a debt free basis for an additional cash consideration paid by the B&M Group of €2.9m. As at 31 December 2017 the EBITDA of the distribution services operations were €0.7m, Profit before tax €0.6m and the Gross Assets were €1.5m.

Simon Arora, CEO of B&M commented:

"B&M has made no secret of its European growth plans since its IPO in 2014. We are delighted that discussions with Babou over a 3 year period have led to today's transaction, which provides us with a platform for future growth in a large and attractive market whilst also providing a stable and logical new owner for Babou. We would like to welcome all Babou's employees and stakeholders to the wider B&M family and look forward to a successful future together."

The acquisition of the Babou Stores Group (including the related distribution services operations) constitutes a Class 2 transaction for the purposes of the UK Financial Authority's Listing Rules, and, as such does not require B&M shareholders' approval.

B&M was advised on the transaction by BofA Merrill Lynch, Ernst & Young and LPA-CGR Avocats, with Debevoise & Plimpton advising on acquisition financing. The acquisition financing was provided by BNP Paribas.

This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulation.

Enquiries

B&M European Value Retail S.A.

For further information please contact +44 (0) 151 728 5400

Simon Arora, Chief Executive OfficerPaul McDonald, Chief Financial Officer

Steve Webb, Investor Relations Director

Investor.relations@bandmretail.com

Media

For media please contact +44 (0) 207 379 5151

Maitland 

Daniel Yea

bmstores-maitland@maitland.co.uk

Notes to editors

B&M European Value Retail S.A. is a variety retailer with 591 stores in the UK operating under the "B&M" brand and 269 stores under the "Heron Foods" brand, and 88 stores in Germany primarily operating under the "Jawoll" brand as at 29 September 2018. It was admitted to the FTSE 250 index in June 2015.

The B&M group was founded in 1978 and listed on the London Stock Exchange in June 2014. For more information please visit www.bmstores.co.uk 

Merrill Lynch International ("BofA Merrill Lynch"), a subsidiary of Bank of America Corporation, is acting exclusively for B&M in connection with the acquisition and for no one else and will not be responsible to anyone other than B&M for providing the protections afforded to its clients or for providing advice in relation to the acquisition