SYDNEY: Australian furniture giant Nick Scali Limited (ASX: NCK) has announced a definitive agreement to acquire the UK-based home furniture specialist, Anglia Home Furnishings Limited, known to consumers as Fabb Furniture.

The deal, which marks Nick Scali’s first foray outside of Australia and New Zealand, is set to enhance the company’s geographic diversity and scale.

The acquisition involves a purchase consideration of £2.00 and the assumption of Fabb Furniture’s secured debt amounting to £3.5 million.

Additionally, Nick Scali plans to invest £0.5 million to terminate the current distribution centre contract and inject up to £6.0 million in net working capital.

Post-acquisition, Nick Scali is poised to further invest in the Fabb Furniture network, aligning with its UK growth strategy.

This includes store refurbishments, rebranding efforts, the establishment of a new distribution centre, and the opening of new stores.

The revamped network will transition to the Nick Scali product range, leveraging the company’s buying power and supply chain efficiencies.

The funding for the acquisition and subsequent investments will come from a A$46.0 million underwritten institutional placement and a A$4.0 million conditional placement to an entity associated with Anthony Scali, the CEO and Managing Director of Nick Scali.

The placements are subject to shareholder approval at the company’s AGM slated for October 2024. Furthermore, existing shareholders will have the opportunity to participate in a non-underwritten Share Purchase Plan (SPP) aiming to raise up to A$10.0 million.

Fabb Furniture, established in 1979, boasts a significant presence in the UK home furnishings market with a 21-store network. These stores are strategically located in out-of-town retail parks, covering over 24,000 square metres of real estate and offering 39,000 square metres of retail space.

Anthony Scali, CEO of Nick Scali, expressed enthusiasm about the acquisition, stating, “The acquisition of Fabb Furniture provides an opportunity to enhance our geographic diversity and scale beyond Australia and New Zealand for the first time.” He highlighted the immediate entry into the large UK market and the potential for establishing the Nick Scali brand in a new and attractive market. Scali also noted the opportunity to improve Fabb Furniture’s gross margin, which currently trails behind larger UK competitors by approximately 10 percentage points.

The ambitious acquisition and UK growth strategy underscore Nick Scali’s commitment to expanding its global footprint and capitalizing on new market opportunities.