Brantano, a large-scale player in Belgian and British footwear, is likely to be bought in the next weeks by the Macintosh Retail Group, a Dutch retailing conglomerate selling footwear as well as cycling, furniture and telecom products. Among other measures, Macintosh plans to optimize joint buying of sports footwear: The Dutch company already owns Pro Sport, a small chain of sports footwear, and last year it acquired Scapino, a discount-oriented chain carrying sports products.
If completed, the transaction will form one of the largest shoe retailers in Europe, with total footwear sales of about €635 million in the Netherlands, Belgium, the U.K. and Germany representing about one-half of their combined turnover. On a pro forma basis, including other retail operations, the two groups would have total combined sales of more than €1.2 billion in 2006.
Brantano reported sales of €295.2 million in 2006 through 286 stores. The 125 stores in Belgium and Luxembourg generated sales of €136.3 million in 2006; 146 stores in the U.K reported sales of €158.9 million (including 11 franchises in the Middle East). Brantano’s sales are made up of about 75 percent ordinary footwear, 15 percent sports products and 10 percent apparel and accessories.
At €55 per share, the Dutch group’s all-cash offer values Brantano at about €158.2 million. It’s almost certain to go ahead since Macintosh has already obtained the support of Brantano’s board of directors and the commitment of Mitiska and Sobradis, two major shareholders who jointly control 56.6 percent of Brantano, the rest being in free float on the Euronext stock exchange. Mitiska is a Belgian holding company in the retail business, while Sobradis is the family holding company of Joris Brantegem, the son of Brantano’s founder and chairman of its board.
The deal fits neatly with Macintosh’s declared strategy to expand at least partly through acquisitions, moving ahead of an expected consolidation of the European footwear business. While Macintosh is the market leader in Dutch footwear retailing, the acquisition of Brantano will enable it to enjoy the same position Benelux-wide and to break into the U.K. market on a large scale.
The move is the latest in a series of cross-border deals between the Netherlands and Belgium in the footwear and sporting goods industries. Just a few weeks ago, the leading Belgian outdoor retailer, AS Adventure, acquired its counterpart in the Netherlands, Bever Zwerfsport, while United Sports Group, a Dutch retail and wholesale company, bought sports stores under the Primo banner in Belgium.
Macintosh’s offer represents a premium of 29.8 percent on Brantano’s share price in the three months prior to the announcement as of Oct. 29. Macintosh says the price was based on a multiple of 7.9 for the operating profit before amortization and depreciation (EBITDA) reached by Brantano in 2006 before extraordinary items. This is roughly in line with the valuation of Macintosh on Euronext, which was 7.8 times its EBITDA at the end of 2006.
Macintosh reported sales of about €914.5 million last year, including revenues of €327.4 million generated by 450 stores in its fashion division. This gives Macintosh a market share of about 13 percent in value and 17 percent in volume in Dutch shoe retailing, spread over Pro Sport, Scapino and several high-end banners. On the other hand, the Dutch retailer’s share was marginal in Belgium, where it operates only 31 Scapino stores. The purchase of Brantano, which is the leading Belgian shoe retailer with a market share of 10 percent in value, will enable Macintosh to seize Belgian market leadership in footwear.
Macintosh’s managers told reporters that Brantano should substantially contribute to its profits from 2010 onward. The first year will be a period of integration, but Brantano should begin to add to Macintosh’s earnings per share in 2009 and to deliver meatier profits thereafter. By 2010, Macintosh intends to lift the operating margin of Brantano from 3 to 6 percent by optimizing private labels and seeking significant synergies in purchasing.
The Dutch company emphasizes that the tie-up should not lead to any job losses among the 2,945 employees of Brantano, which will be run as an independent operation. In fact the payroll should increase since Macintosh has already planned 10 store openings for Brantano in Belgium by 2010. Once its recovery is confirmed in the U.K., Brantano could seek further expansion in that country as well.
Brantano’s head office will remain in the Belgian town of Erembodegem and its management will stay in place under the leadership of its chief executive, Kurt Moons. Incidentally, Macintosh’s current chief executive, Frank de Moor, a Belgian citizen, was Brantano’s general manager for four years until 1994.
At a joint press conference in Erembodegem, all managers and shareholders involved looked highly relieved that the deal had been sealed, after several years of hemming and hawing. Mitiska has repeatedly thrown its Brantano shareholding into play, once even considering a reverse takeover by Brantano, and talks about a change of ownership have been going on again since July 2006. The acquisition by Macintosh will be financed through loans. Should Macintosh obtain at least 95 percent of Brantano’s shares, it would squeeze out the rest and take the company off the stock exchange.
The full takeover should be completed once Macintosh gets approval from a majority of shareholders at an extraordinary meeting. scheduled for Nov. 15. For the deal to go through, at least 85 percent of the shares must be tendered and the relevant Belgian authorities must approve it.
