B&M group in £80m swoop for French discount chain

Simon Arora, B&M
Simon Arora

Liverpool-based discount retailer B&M has paid £80.34m for a French discount general merchandise retailer group, trading as Babou.

The business operates 95 stores and for the year to January 31, 2018, delivered revenues of £305.8m, EBITDA of £21.76m, and a pre-tax profit of £880,949. It has gross assets of £254.95m.

It operates in the discount retail sector and its stores are mainly located at out-of-town sites, with an average 27,000 sq ft of retail space, compared with B&M’s UK average of 19,500 sq ft.

The acquisition, by B&M’s subsidiary, EV Retail Limited, includes the debt of the Babou Stores Group refinanced by B&M.

It was paid in cash, financed by an additional loan facility.

B&M says the deal will provide a base which will enable it to develop and grow in France its proven and profitable value retail model.

It said: “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 chief executive.

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 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 £2.55m.

As at December 31, 2017 the EBITDA of the distribution services operations were £616,664, pre-tax profit was £528,569, and the gross assets were £1.32m.

Simon Arora, B&M chief executive, said: “B&M has made no secret of its European growth plans since its IPO (flotation) in 2014.

“We are delighted that discussions with Babou over a three 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.”

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.