Mothercare plans to open additional international stores

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Mothercare has outlined plans for international expansion after agreeing to buy the Early Learning Centre children's toy chain for £85m (€124.67).

The move, sealed during the weekend, brings together two of the high street's biggest names in children's retailing.It creates a retail giant with 435 UK stores and 420 franchised stores overseas, including Ireland.

It said: "Management intends to work with the enlarged group's franchises to explore the opportunity to open additional international stores and extend the global reach of both brands."

The cash and shares takeover will be Mothercare's biggest acquisition and the first for chief executive Ben Gordon, who joined in 2002. ELC was put up for sale last month by bookshop entrepreneur Tim Waterstone along with joint owners Rhone Capital and Beano publisher DC Thomson.

The deal will bring a £1m windfall for Waterstone. Most of the sale price will cover ELC's debt and claims by preferential shareholders. Waterstone's consortium bought ELC for £62m in 2004 from private equity firm 3i. Profits tumbled from £3.5m to a loss of £9.8m for the year to May 2006.

The Babycare retailer is paying ELC's owner, Chelsea Store Holdings, £49m (€71.86m) in shares as well as taking on the company's £36m (€52.8m) debts.

Mothercare, which opened its first overseas store in Kuwait in 1982, operates in 24 countries where ELC has no foothold and plans to use the deal extend its overseas franchise network.The international business has been the success story of Mothercare, after sales growth of 28% in the 11 weeks to March 31.

In the UK, Mothercare plans to open ELC outlets in more than 70 of its out-of-town stores, with ELC's larger toy presence adding to Mothercare's home and baby clothing products to offer broader ranges to customers.

The company is also looking to make savings from the combined group's store portfolio – Mothercare currently has 225 UK stores while ELC has 210 – and improve margins by being able to drive a harder bargain from suppliers.

Mothercare is aiming to deliver £8m (€11.73m) in overall cost savings from the deal in the second full year following the acquisition.

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