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B&M Bargains owner B&M European Value Retail (BME) has agreed to buy French general merchandise retailer Babou in a deal valued at €91.2m.

B&M announced late on Friday it will buy the entire share capital of the value retailer Paminvest, which operates 95 stores with 30,000 general merchandise, seasonal and textiles SKUs under the Babour trading name in France.

Babou’s stores are predominantly located at out of town sites with an average 27,000 sq ft of retail space, compared to B&M’s UK average of 19,500 sq ft.

For the year ended 31 January 2018 the Babou Stores Group posted revenues of €347.1m and EBITDA of €24.7m. Profit before tax in the period was €0.1m (after goodwill amortisation €10.7m) and the group had gross assets of €289.4m at 31 January 2018.

The total enterprise value of the transaction is €91.2m, which includes the debt of the Babou Stores Group refinanced by B&M.

The deal was completed on Friday with the consideration paid by cash financed by an additional loan facility.

B&M said the deal will provide it with “a base to develop and grow in France its proven and profitable value retail model”.

B&M’s said its strategy for the Babou business is to apply B&M’s direct product sourcing and limited assortment SKU model, while refining Babou’s product offering.

The acquisition is expected to be immediately earnings enhancing. However, the first 12 months of ownership will be a period of transition as the acquired business realigns its product offering closer to that of B&M, which will impact the level of Babou’s earnings in the short term.

“The French market, alongside the existing German and UK markets in which B&M operates, has attractive dynamics including overall market size, the popularity of the growing discount channel and the healthy operating margins achieved by several incumbent operators,” B&M stated.

Babou is currently led by Thierry Morter, who is retiring from the business as part of the transaction, and is succeeded by Cedric Mahieu as CEO.

Simon Arora, CEO of B&M commented: “B&M has made no secret of its European growth plans since its IPO in 2014. We are delighted that discussions with Babou over a 3 year period have led to today’s transaction, which provides us with a platform for future growth in a large and attractive market whilst also providing a stable and logical new owner for Babou.”

Morning update

Casino (CO) owner Rallye has announced it has received an offer for its Courir sports business from private equity group Equistone Partners as it looks to cut debt.

Rallye announced this morning that its 100%-owned subsidiary, Groupe Go Sport, received today a binding offer from Equistone Partners Europe for the acquisition of the whole business of Courir, for an equity value of €283m.

The deal is yet to be agreed, but Groupe Go Sport has entered today into exclusive negotiation with Equistone Partners Europe.

The completion of this transaction could occur in the course of the first half of 2019.

Courir has 248 stores in France (of which 58 affiliates) and 30 abroad (of which 2 in Spain), and is one of the leading fashion sports shoes provider in France, especially among women and 15-25 years old.

Rallye and Casino have been under pressure to cut debt after the latter’s credit rating was cut amid continued struggles in its domestic market.

On the markets this morning, the FTSE 100 has risen 0.2% back to 7,066.3pts so far this morning.

Early movers include B&M, up 2.3% to 394.3p on its French acquisition, Premier Foods (PFD), up 2% to 40p and Marston’s (MARS), up 1.2% to 99.4p.

Fallers so far include McColl’s (MCLS), down 3.1% to 126p, Devro (DVO), down 1.6% to 183p, AG Barr (BAG), down 0.9% to 749p and Greencore (GNC), down a further 0.8% to 193.4p.

This week in the City

With a week to go until Chancellor Philip Hammond unveils his budget next Monday, it’s a quieter week in the City as most schools enter the half term period.

There is a smattering of UK news in the diary this week, starting with private label supplier McBride’s (MCB) first quarter results tomorrow and Costa Coffee and Premier Foods owner Whitbread’s (WTB) interim results also tomorrow after agreeing to sell its coffee chain to Coca-Cola.

Cider producer C&C Group (CCR) will issue its interim results on Thursday.

Away from the UK, US consumer group Kimberly Clark will issue its third quarter earnings later today, while McDonald’s (MCD) posts third quarter numbers tomorrow, Heineken (HEIN) will release third quarter results on Wednesday, Coca-Cola European Partners (CCE) will issue its own third quarter numbers on Thursday, as will Hershey (HSY).

In economic news, the CBI’s Industrial Trends Surveys for the month are out tomorrow.

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