The title of the Brick furniture retailer jumped 52 percent Monday or $1.82 on the Toronto Stock Exchange in the wake of the announcement of its acquisition by rival furniture Leon in a 700 million friendly bid $.
At a Monday press conference, furniture Leon has indicated that it will contribute $5.40 for each share of Brick, whose title had closed at $3.50 Friday. He finished Monday at $5,32 session.
According to the two companies, which will retain their banners, this bid has less to do with the arrival in the country of many U.S. competitors such as Target and Wal-Mart, with the need to control costs.
The announcement of the transaction occurs while the economic situation is difficult for furniture retailers, whose sales are sealed by the downturn of the real estate market.
“What we have in mind is the fact that the economic climate is difficult, growth is usually not at the venue, and if the economy is growing, it is generally very slow,” said Terry Leon, president and CEO of the group who will lead the new entity in the term.
«The best way to develop and grow is to, if possible, make an acquisition that has sense.»
The Canadian retail market has undergone several transformations in recent years, as more and more American channels wishing to expand have turned to Canada, which increased competition in several submarkets, including furniture.
Several Canadian retailers, Loblaw at Canadian Tire, have acted to increase their competitiveness by diversifying their product offering, including selling furniture, gradually transforming itself into stores multifaceted for consumers.
Leon and Brick are facing new competitors, mainly with the arrival of Target, which provides open 135 stores in the country over the next year.
Walmart will also 73 stores in Canada in the coming months, including 28 converted Zellers stores.
The acquisition of Brick would consolidate the position of Leon in the home furnishings market, argued Mr. Leon, in a statement issued Sunday night.
“In these economic times where we saw several American companies to settle in the country through acquisitions, it’s nice to see two Canadian retailers reach an agreement that will better serve Canadian consumers”, he said.
He also pointed out that together, the two banners will have a greater purchasing power and a national distribution network that will offer more opportunities for purchase online.
Other retailers such as Pharmaprix, HBC and Jean Coutu prepare also on arrival at the Target country, either by restructuring or by changing the way they do business.
Mr. Leon will remain president and CEO of Leon and will become CEO of the new company. The CEO of Brick, Vi Konkle, will remain president and CEO of Brick, indicated the two companies.
In the statement, Mr. Konkle said the transaction would make the two strongest groups and that Brick would preserve its roots in Edmonton.
Furniture Leon, whose head office is in Toronto, wants to complete the transaction in the first three months of next year. It will require judicial approval and competition authorities.
Both companies have said do not have the intention to proceed with layoffs or close stores. They say rather consider improving competitiveness by joining their purchasing power and their distribution systems.
Furniture Leon has 76 stores in all provinces except the province of British Colombia.
Brick, whose head office is in Edmonton, has 230 stores under the Brick, Brick urban banners, United Furniture Warehouse and Brick mattress stores.