Frasers Group is preparing to bid for Norwegian sporting chain XXL Sport & Villmark, signaling a strategic international expansion.
- Frasers holds a 25.8% stake in XXL and aims to buy remaining shares at 10 kroner per share, valuing XXL at about £17.45m.
- The acquisition is part of Frasers’ strategy to manage XXL’s stock availability issues and boost profitability.
- Frasers has expressed confidence in revitalizing XXL, backed by a potential £35m support agreement for stock management.
- Despite challenging trading conditions, Frasers remains committed to its vision and industry expertise to guide XXL through its hurdles.
The announcement from Frasers Group marks a significant step as it gears up to bid for the Norwegian sporting goods chain, XXL Sport & Villmark, as part of its international growth strategy. Frasers, known for owning Sports Direct, is eyeing this acquisition to expand its footprint globally and address challenges faced by XXL.
Currently being the second largest shareholder of XXL with a 25.8% stake, Frasers plans to purchase the remaining shares at a rate of 10 kroner per share. This move pegs XXL’s valuation at approximately £17.45 million. This acquisition is not merely a financial move but a strategic initiative to overcome XXL’s ongoing profitability issues.
XXL has been grappling with stock availability problems, which have impacted its profitability. Addressing this, the Group has proposed a strategic support plan. They are willing to offer up to £35 million (500 million kroner) to assist with XXL’s stock through a delayed payment plan. This would allow XXL to repay the amount only upon selling the stock, easing the cash flow issues.
Frasers’ CEO Michael Murray emphasized their unique position and readiness to aid XXL, hoping to navigate the chain’s current market challenges. He stated, “Our strategic vision and industry experience position us uniquely to help XXL navigate its current challenges. We are committed to ensuring that XXL reaches its full potential.”
The backdrop to this ambitious move includes Frasers’ announcement of a reduction in its profit expectations for the year. The company has adjusted its forecast downward by £25 million owing to tougher trading conditions and an 8.4% decline in half-year sales of its retail arm to £2.45 billion. Furthermore, Frasers reported a significant drop in its pre-tax profit by 33% to £207.2 million, primarily due to foreign exchange fluctuations and declining share price of Hugo Boss. Yet, an adjusted profit showed a more moderate decline of 1.5% to £299.2 million. Despite these challenges, the Group is confident about the potential positive impact of the takeover.
Frasers Group’s strategic acquisition of XXL Sport & Villmark reflects its commitment to overcoming industry challenges and achieving international growth.
