Canadian Tire bids to buy country's largest sports retailer group - SNEWS

Canadian Tire bids to buy country's largest sports retailer group

Canadian Tire, a general and fitness retailer, has offered to buy The Forzani Group, which owns Canada's largest chain of sporting goods stores as well as outdoor and fitness specialty stores.

A Canadian diversified retailer of everyday home, auto, outdoor and fitness products has made an offer to buy Canada’s largest chain of sporting goods stores for nearly USD $800 million.

Canadian Tire Corporation (TSX:CTC) announced plans May 9 to purchase The Forzani Group Ltd. (TSX:FGL) for $771 million Canadian (USD $798.5 million), or $26.50 per share – a 50 percent premium relative to Forzani’s May 6 closing price. Canadian Tire already owns 4 percent of Forzani’s shares.

Forzani operates about 500 retail locations across Canada including Sport Chek, Sport Mart, Athletes World, National Sports, Sports Experts, Intersport, Atmosphere, Tech Shop, Nevada Bob's Golf, Hockey Experts, The Fitness Source and S3. The stores sell both brand name and private-label sporting goods equipment, outdoor gear, fitness equipment, apparel and footwear.

Canadian Tire has 485 general retail stores, which among others things is a leading seller of fitness equipment and outdoor hard goods. It also owns about 350 gas stations and automotive stores, and 378 Mark's Work Warehouse stores selling work apparel.

The transaction will result in more than 1,000 combined stores selling sporting, outdoor and fitness goods between the two companies, but Canadian Tire plans to operate the Forzani retail banners as a separate business unit.

“More than 70 percent of Forzani’s sales are in athletic apparel and footwear, with the balance of sales in sporting hard goods that complement Canadian Tire's assortment with very little overlap,” company officials said in a statement. “Canadian Tire will also gain from having access to an expanded customer base with Forzani’s retail banners, including mall-based shoppers and the important 18-35 year-old customer segment.”

The deal has support of Forzani’s board of directors and is expected to close in the third quarter of 2011. Canadian Tire has the right to match any competing bid and Forzani will pay its suitor $15 million if the deal does not go through under certain circumstances.

“Canadian Tire expects to realize significant cost synergies by leveraging the strengths of both organizations, including supply chain, marketing and global sourcing,” officials said “Annualized savings are expected to be about (CA) $35 million, with approximately (CA) $25 million of annualized savings realized in 2012.”

--Compiled by David Clucas

(Conversion of Canadian dollars into into U.S. dollars is for information only, is not necessarily relative to earnings, and is based on the currency rate as of May 9, 2011.)



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