US acquisition
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Michael Hill International Limited (MHI) | 11:06 am, Friday 22 August 2008 | MHI | 0.630 |
 0.010 |
(+1.61%) |
Michael Hill International Ltd - US Acquisition
Michael Hill International today announced it has entered into a conditional
agreement to acquire 17 stores in Illinois and Missouri in the United States
from the Chapter 11 bankruptcy of Whitehall Jewelers Holdings Inc.
The purchase price is approximately USD$5.0m (NZD$7.0m) and is payable in
cash upon settlement which is anticipated to occur on or before September 9
2008. This will be funded from existing bank facilities and cash resources.
The purchase price is attributed primarily to the inventory and will be set
at an amount equal to 80 cents on the dollar on the cost price of the
inventory held at the 17 locations on the settlement date. The acquisition
includes Whitehall's rights with respect to store fitouts and leases for all
17 stores and all other trading assets at those locations.
The agreement is conditional upon receipt of any necessary regulatory
approvals and approval of the transaction by the United States Bankruptcy
Court overseeing the Whitehall Chapter 11 case. These conditions must be
satisfied prior to closing date. At this stage, it is expected that the
necessary court hearing to approve the transaction for the purpose of US
bankruptcy laws will be held on 28 August 2008. Michael Hill International
will take possession of the stores as soon as possible following the
satisfaction of all relevant conditions.
Michael Hill International considers that it has secured 17 prime locations
that will provide a sound launching pad to the large US market. The majority
of stores are clustered in and around Chicago with 2 stores in St Louis,
Missouri, which is located at the southern tip of Illinois. This grouping of
stores fits with our historical pattern of building a concentration of stores
in new markets to leverage efficiencies in logistics, marketing and
management supervision.
Michael Hill International views this as a strategic acquisition to test its
retail model in the highly competitive US market, albeit at a time when the
economy is challenging. The company does not expect these stores to achieve
profitability for several years but believes the opportunity presented by the
Whitehall Jewelers acquisition was one which would enable Michael Hill
International to enter this market on favourable terms. Our short to medium
term focus will be on honing our retail formula for future growth from this
base.
R.M. Hill 22/08/2008
Chairman
Internet Home Page www.michaelhill.com
All inquiries should be made to Mike Parsell CEO phone +61 403 246655
