Nick Scali shares rocket on completion of $46m raise
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The news: Nick Scali shares rocketed on the ASX after it confirmed the completion of its $46 million institutional placement to support the acquisition of specialist UK home furniture retailer Anglia Home Furnishings, which trades as Fabb Furniture.
The numbers: Nick Scali completed the placement of around 3.5 million new shares to institutional investors at a price of $13.25 per new share.
The acquisition of Fabb Furniture will also be funded through a $4 million conditional placement to an entity associated with Nick Scali's CEO and managing director Anthony Scali, subject to shareholder approval being sought at the company's annual general meeting, expected to take place in October.
Nick Scali emerged from a trading halt on Friday morning and gained 12.2% to $15.78 by 11:30am AEST.
Jarden analysts also upgraded the stock to 'buy' from 'overweight' and increased its target price to $15.40 from $13.87, following the announcement of the takeover.
The context: Nick Scali said the institutional placement was strongly supported by both existing shareholders and new institutional investors. New shares under the institutional placement are expected to settle on 30 April and commence trading on the ASX on 1 May.
Announcing the takeover on Wednesday, Nick Scali said it intends to invest further in the existing Fabb Furniture network in order to establish the Nick Scali brand in the UK. It said the acquisition will give it entry into the UK market with Fabb Furniture's 21-store network and an opportunity to establish the Nick Scali brand at scale at a relatively low cost in the UK.
What they said: Jarden analysts said: "We still see Nick Scali as one of the highest quality ASX retailers (strong brand, high margin, capital light, low inventory risk per small retailers). Its UK entry through a low-risk acquisition (relative to potential alternate deals) provides a significant opportunity for long-term international growth".
"We note that despite currently being loss making, the potential synergies are so significant that the deal could be earnings per share (EPS) accretive in FY26 (presenting upside to our forecasts). We also conservatively estimate Fabb could increase its store footprint by two to three times, although we will wait for evidence of execution before reflecting this in our forecasts," they said.
The sources: ASX announcement, Jarden research
