UPDATE: Airport Retailer Dufry Snaps Up US Peer For $446 Million
Thursday September 4th, 2008 / 13h03
(Recasts, adds comments from CEO, analysts and background.) By Goran Mijuk and Martin Gelnar Of DOW JONES NEWSWIRES ZURICH -(Dow Jones)- Swiss travel retailer Dufry AG (DUFN.EB) Thursday said it will fully take over U.S.-based competitor Hudson Group for $446 million, further speeding up consolidation in this fast growing and highly fragmented sector. The deal, which was set up by Dufry shareholder Advent International Corp., a Boston-based private equity firm, follows Italy-based Autogrill SPA's (AGL.MI) takeover of World Duty Free and Aleasa in March and privately-held Netherlands-based Gerzon Holding BV's acquisition of Mimex Group in July. Analysts generally welcomed the transaction, but shares of Dufry came under heavy pressure as the Swiss firm will take up fresh debt to finance the transaction. At 1036 GMT, shares were down CHF7.95, or 9.8%, at CHF73. The acquisition, which is expected to create synergies of about $20 million within two years, will add some 605 million Swiss francs, or $666 million, in annual sales to Basel-based Dufry, which in 2007 posted revenues of CHF1.89 billion. "The combination of Hudson's retailing expertise with Dufry's know-how in international markets are a perfect match to create a convenience store concept on an international scale," said Dufry Chief Executive Julian Diaz. Hudson, a perviously privately-held company that was last year partly taken over by Advent and Dufry, has more than 4,000 employees. Initially concentrating on distributing newspapers, the company later broadened its business to cater airports and now operates bookstores and giftshops at airports in the U.S. and Canada. Dufry, which said the combined company will control around 1,000 shops at 137 airports, wants to promote Hudson's duty paid news brands on an international scale over the next four years. Meanwhile, analysts expect more deals as the extremely fragmented $27 billion airport retail market, which is split up by more than 2500 firms, is expected to grow at double-digit rates over the next five years. Experts say the sector is showing no sings of a slowdown despite recession concerns undermining growth at traditional retailers. Strong growth is expected in emerging markets where air travel continues to soar. As part of the transaction, Dufry, which earlier this year already bought a 11.2% stake in the U.S. company, said it has signed an agreement about a full takeover of Hudson with majority owner Advent and other shareholders. The transaction will take the form of a share swap in which shareholders of Hudson will receive 4.2 million Dufry shares, as well as notes that will convert into an additional 900,000 Dufry shares. Additionally, Dufry said it will take a loan to refinance Hudson's and its own debt. It arranged a five-year facility of around 1.25 billion Swiss francs ($1.14 billion) with a syndicate comprising Banco Santander SA (STD), BNP Paribas SA (BNPQY), ING Groep NV (ING), Raiffeisen Zentralbank, and Royal Bank of Scotland Group PLC (RBS). The banks have fully underwritten the loan. After the closing of the transaction, Advent and Advent-related funds such as Travel Retail Investments will own more than 40% in Dufry's share capital, reducing the company's free float to about 46% from above 50% at the moment. Company Web site: http://www.dufry.com -By Goran Mijuk and Martin Gelnar, Dow Jones Newswires, +41 43 443 8042; goran.mijuk@dowjones.com, martin.gelnar@dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=kXPiw57%2F7E9zVOtnhl1Y5g%3D%3D. You can use this link on the day this article is published and the following day.
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