INTERNATIONAL. Dufry signed a merger agreement yesterday with North American specialist travel retailer Hudson Group, which is majority owned by private equity firm Advent International.
The complex deal gives Dufry 100% control of the much-respected duty-paid retailing specialist and consolidates the Swiss company’s presence in North America, one of its key strategic markets.
The transaction will include an exchange of shares of Hudson Group’s common stock into Dufry equity, as well as the full refinancing of existing debt.
Following the transaction, Advent, which manages separate funds which control Travel Retail Investments SCA (TRI) – the controlling shareholder of Dufry – will continue to control Dufry. As a result, Dufry will directly own 100% of Hudson.
In 2007, Hudson generated a turnover of USD$666 million and EBITDA of US$85 million, resulting in an EBITDA margin of 12.8%.
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“For Dufry, this transaction is a great opportunity to build up a strong position in the duty paid segment which complements Dufry’s duty free business at a similar profitability level“ |
Julián Diaz Chief Executive Officer Dufry Group |
Dufry said it had signed a definitive agreement with the other Hudson shareholders to acquire the remaining 88.8% of Hudson, having already purchased 11.2% of the North American company’s equity in mid-April 2008.
Dufry said that the value for 100% of the Hudson equity amounts to US$446 million.
The equity part of the transaction will be structured as a non-cash share swap. The existing debt of Hudson Group (approximately US$390 million) as well as of Dufry will be refinanced. The transaction is subject to customary regulatory approvals.
Dufry described Hudson Group as “the premier travel retailer in North America” with 540 duty paid stores in 70 airports and transportation terminals throughout the US and Canada.
It said that the transaction will further reinforce the company’s leading global position in travel retail and strengthen its presence in travel retail’s duty paid segment.
The combined group will operate around 1,000 shops at 137 airports with a 2007 pro forma combined turnover of approximately CHF2.6 billion (US$2.4 billion).
After the merger, Hudson will become a wholly owned subsidiary of Dufry. Hudson’s current management team will remain in place and will continue to work closely with existing airport authorities and other landlords, Dufry said.
Dufry said it intends to build on Hudson’s highly recognizable Hudson News brand, rolling out Hudson’s business model internationally over the next three to four years.
In the first phase Dufry will focus on airports, where it already operates similar duty paid concepts or where it has a significant presence in duty free retailing, thus leveraging its existing infrastructure and organization.
Dufry expects to realise annual revenue and cost synergies from the acquisition of approximately CHF20 million (US$18.1 million) within two years.
Dufry CEO Julián Diaz commented: “We are delighted about this transaction – Hudson has superior profitability compared to industry standards. For Dufry, this transaction is a great opportunity to build up a strong position in the duty paid segment which complements Dufry’s duty free business at a similar profitability level.
“The combination of Hudson’s retailing expertise with Dufry’s know-how in international markets and global footprint are a perfect match to create a duty paid convenience store concept on an international scale.”
He added: “In the first phase, we plan to grow the duty paid business internationally in locations where we already operate duty free. This means that we can expand our activities and increase our share of wallet in existing Dufry operations based on Hudson’s proven and very successful business model.
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Hudson Group President and Chief Operating Officer Joseph DiDomizio: “This transaction provides Hudson with enhanced geographic diversification almost immediately as the successful Hudson business model will be replicated all over the world” |
“At the same time, we will be in a position to create synergies through combining and leveraging Dufry’s and Hudson’s platforms. Hudson’s valuable relationships with its airport and retail partners will allow Dufry to explore further growth opportunities in the North American market. Hudson’s highly experienced management team will play a key role in the development of both Dufry’s US business as well as our international convenience store initiative and we are very pleased to welcome them as part of the Dufry team.”
He concluded: “This transaction is a further step to create value for our shareholders and in this context we are very happy to see the renewed support of Advent and our financing banks.”
Joseph DiDomizio, President and CEO of Hudson Group, commented: “We are excited to join forces with Dufry’s pre-eminent global operations. As a result of today’s announcement, Hudson and its partners and customers will have access to highly desirable international specialty and designer brands from over 1,000 suppliers worldwide. This transaction also provides Hudson with enhanced geographic diversification almost immediately as the successful Hudson business model will be replicated all over the world.
“Finally, the alignment with Dufry will provide a new source of funding for growth initiatives and investment in our existing facilities. We are excited at the prospect of working alongside Dufry’s highly skilled management team to create the world’s pre-eminent travel retailer.”
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