Acquisition makes Canadian Tire Corporation
Canada's #1 party supply and
celebration
destination
TORONTO, Aug. 8, 2019 /CNW/ - Canadian Tire
Corporation, Limited (TSX:CTC, TSX:CTC.A) (CTC) announced today
that it has entered into an agreement to purchase Party City's
Canadian business for $174.4 million
(including ~$40 million in
inventory). Party City is a leading, one-stop shopping destination
for party supplies and an expert in seasonal and micro-seasonal
celebrations, with 65 Canadian retail stores in seven
provinces.
Strategic Rationale for Acquisition:
Strengthens CTC's Marketplace
- CTC will immediately become the #1 party supply destination – a
one-stop-shop for all consumers' party and celebration needs;
cementing Canadian Tire as "Canada's Fun Store"
- Party City's exclusive and unique product assortments will be
made available nationally across 500 Canadian Tire Retail (CTR)
stores and online at Canadiantire.ca
- Adds the leading party supply brand to Triangle Rewards,
further expanding and strengthening the program
- CTC will expand Party City's standalone store network in
Canada, and build store-in-store,
pop-ups and "in-line" aisles across CTR
Creates a New Platform for Growth
- Acquiring the leading brand in an underserved, high margin
category for CTC
- With expertise in seasonal and micro-seasonal celebrations,
Party City complements CTC's existing family fun categories and its
role in preparing Canadians for the Joys of Life in Canada
- Provides access to Party City's extensive catalogue, including
exclusive and proprietary designs and licensed products, such as
Disney
- CTC's unparalleled retail capabilities and extensive store
network positions it to double Party City's Canadian retail sales
to $280 million by 2021
Strengthens Connection with Millennials and Canadian
Families
- Gains a powerful customer segment with millennials and Canadian
families, expanding the appeal of Triangle Rewards
- Adds a trip-driving category, with the average household
hosting four parties or celebrations per year
- Significant opportunity to grow Triangle Rewards engagement and
membership through Party City's appeal to these high lifetime value
customer segments
Strong Financial Fundamentals
- Immediately accretive to EBITDA, ROIC and diluted EPS
- Combination will accelerate Party City's growth in Canada and unlock operational synergies
- CTC expects its estimated EBITDA attributable to Canadian
Tire's acquisition of Party City's business in Canada to more than double, yielding an
implied EBITDA multiple in the mid to low single digits by
2021
"Strengthening our marketplace is at the heart of our growth
strategy and we are excited to welcome Party City into the Canadian
Tire family of companies. We believe the Party City-Canadian Tire
partnership will drive more trips, improve our offers in micro
seasons, strengthen our connection with millennials and Canadian
families and expand the appeal of Triangle Rewards," said
Allan MacDonald, EVP, Retail,
Canadian Tire Corporation. "With our extensive CTR store network,
unparalleled retail capabilities and Party City's unique
assortment, we are well-positioned to more than double Party City
Canada's business by 2021."
"CTR has an unbeatable store network, retailing capabilities and
customer loyalty. These assets, combined with our wholesale supply
agreement, positions them well to grow the Party City brand in
Canada," said Jim Harrison, Chief Executive Officer, Party
City Holdco Inc.
Transaction Details
CTC has agreed to purchase Party
City's brand, store network and employee base, leaseholds and fixed
assets in Canada for $174.4 million (including ~$40 million in inventory). The acquisition is
expected to close in Q3 2019 and is subject to the usual closing
conditions. CTC has ample financial flexibility to fund the
acquisition.
Investment Community Conference Call Details
Canadian
Tire Corporation will conduct a conference call to discuss
information included in this news release and related matters at
8:00 a.m. ET on August 8, 2019. The dial-in number is
416-340-2216 or 1-800-273-9672. The conference call will be
available simultaneously and in its entirety to all interested
investors and the news media through a webcast at
http://investors.canadiantire.ca, and will be available through
replay at this website for 12 months. For more information related
to this transaction, please visit
https://corp.canadiantire.ca/English/investors/events-and-presentations/Presentations/default.aspx.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking information within
the meaning of applicable securities legislation, which reflects
management's current expectations regarding the proposed
acquisition and future events. All statements other than statements
of historical facts contained in this press release may constitute
forward-looking information, including but not limited to:
statements concerning the expected benefits of the proposed
acquisition, including with respect to the impact of the
acquisition of Party City's business in Canada on CTC's EBITDA, ROIC and diluted EPS
accretion, CTC's estimated retail sales for the acquired business,
CTC's estimated EBITDA attributable to the proposed acquisition,
the implied future EBITDA multiple of the proposed acquisition, the
expansion of the Party City brand in Canada and the realization of synergies; the
expected timing of the proposed acquisition, if completed; CTC's
financial flexibility to fund the transaction; and management's
expectations relating to other possible or assumed future prospects
and results, CTC's strategic goals and priorities, and the economic
and business outlook for CTC. Often, but not always,
forward-looking statements can be identified by the use of
forward-looking terminology such as "may", "will", "expect",
"intend", "believe", "estimate", "plan", "can", "could", "should",
"would", "outlook", "forecast", "anticipate", "aspire", "foresee",
"continue", "ongoing" or the negative of these terms or variations
of them or similar terminology. Forward-looking statements are
based on the reasonable assumptions, estimates, analyses, beliefs
and opinions of management, made in light of its experience and
perception of trends, current conditions and expected developments,
as well as other factors that management believes to be relevant
and reasonable at the date that such statements are made. CTC has
provided these forward-looking statements for the purpose of
presenting information about management's current expectations and
plans relating to the proposed acquisition and readers are
cautioned that these statements may not be appropriate for other
purposes.
By their very nature, forward-looking statements require
management to make assumptions and are subject to inherent risks
and uncertainties, which give rise to the possibility that CTC's
assumptions, estimates, analyses, beliefs and opinions may not be
correct and that CTC's expectations and plans will not be achieved.
Although CTC believes that the forward-looking information in this
press release is based on information and assumptions that are
current, reasonable and complete, this information is necessarily
subject to a number of factors that could cause actual results to
differ materially from management's expectations and plans as set
forth in such forward-looking information for a variety of reasons.
Some of these factors – many of which are beyond management's
control and the effects of which can be difficult to predict –
include: (a) the risk that Party City's Canadian business will not
be integrated successfully; (b) the possibility that the
anticipated benefits and synergies from the proposed acquisition
cannot be realized or may take longer to realize than expected; (c)
the ability of CTC and Party City to maintain relationships with
customers, suppliers and other business partners, (d) risks
associated with the supply arrangements; (e) the risk that
regulatory approvals required for the proposed acquisition are not
obtained, or are obtained on unfavorable terms; (f) the risk that
regulatory approvals may delay the proposed acquisition; (g) the
risk that a condition to the closing of the proposed acquisition
may not be satisfied or the acquisition agreement may be terminated
prior to closing; (h) the diversion of management time and
attention on the proposed acquisition; (i) credit, market,
currency, operational, liquidity and funding risks generally,
including changes in economic conditions, interest rates or tax
rates; and (j) risks and uncertainties relating to information
management, technology, supply chain, product safety, changes in
law, competition, seasonality, commodity price and business
disruption. Management's expectations with respect to the impact of
the acquisition of Party City's business in Canada on CTC's EBITDA,
ROIC and diluted EPS accretion, CTC's estimated retail sales for
the acquired business, CTC's estimated EBITDA attributable to the
proposed acquisition and the implied future EBITDA multiple of the
proposed acquisition are based on a number of assumptions,
including the successful roll out of Party City products across at
least two-thirds of CTR stores, the successful introduction of at
least nine additional Party City stores in Canada and additional
growth in sales at Party City's existing Canadian stores based on
marketing and other initiatives. Management cautions that the
foregoing lists of important factors and assumptions are not
exhaustive and other factors could also adversely affect CTC's
results. Investors and other readers are urged to consider the
foregoing risks, uncertainties, factors and assumptions carefully
in evaluating the forward-looking statements and are cautioned not
to place undue reliance on such forward-looking statements.
For more information on the risks, uncertainties and assumptions
that could cause the Company's actual results to differ from
current expectations, refer to section 2.8 (Risk Factors) of our
Annual Information Form for fiscal 2018 and to sections 7.2.4
(Retail Segment Business Risks), 7.3.2 (CT REIT segment business
risks), 7.4.3 (Financial Services Segment Business Risks) and 12.0
(Risks and Risk Management) and all subsections thereunder of
our Management's Discussion and Analysis for the year ended
December 29, 2018, as well as the
Company's other public filings, available at www.sedar.com and at
https://investors.canadiantire.ca.
The forward-looking information contained herein is based on
certain factors and assumptions as of the date hereof and does not
take into account the effect that transactions or non-recurring or
other special items announced or occurring after the statements are
made have on CTC's business. CTC does not undertake to update any
forward-looking statements, whether written or oral, that may be
made from time to time by it or on its behalf, to reflect new
information, future events or otherwise, except as required by
applicable securities laws.
ABOUT CANADIAN TIRE CORPORATION
Canadian Tire
Corporation, Limited, (TSX: CTC.A) (TSX: CTC) or "CTC", is a family
of businesses that includes a Retail segment, a Financial Services
division and CT REIT. Our retail business is led by Canadian Tire,
which was founded in 1922 and provides Canadians with products for
life in Canada across its Living,
Playing, Fixing, Automotive and Seasonal & Gardening divisions.
PartSource and Gas+ are key parts of the Canadian Tire network. The
Retail segment also includes Mark's, a leading source for casual
and industrial wear; Pro Hockey Life, a hockey specialty store
catering to elite players; and SportChek, Hockey Experts, Sports
Experts, National Sports, Intersport and Atmosphere, which offer
the best active wear brands. The approximately 1,700 retail and
gasoline outlets are supported and strengthened by our Financial
Services division and the tens of thousands of people employed
across Canada and around the world
by the Company and its local dealers, franchisees and petroleum
retailers. In addition, Canadian Tire Corporation owns and operates
Helly Hansen, a leading global brand in sportswear and workwear
based in Oslo, Norway. For more
information, visit Corp.CanadianTire.ca.
FOR MORE INFORMATION
Media: Jane Shaw, jane.shaw@cantire.com
Investors: Lisa Greatrix,
lisa.greatrix@cantire.com
SOURCE CANADIAN TIRE CORPORATION, LIMITED