April 10, 2015 / 7:41 AM / 3 years ago

UPDATE 2-Majestic Wine to buy smaller rival, drops dividend

* Sees FY profit at about 21 mln stg, below analysts’ estimates

* To buy Naked Wines for 70 mln stg

* Appoints Rowan Gormley as CEO

* Shares fall as much as 12 pct (Adds Chairman, CEO comment, details; updates share price)

By Aastha Agnihotri

April 10 (Reuters) - British wine retailer Majestic Wine Plc said it would buy Naked Wines International Ltd for 70 million pounds ($102.89 million) in a cash-and-stock deal and forecast full-year profit below analyst expectations.

The wine retailer also said it would withhold final dividend for 2015 and interim dividend for the next year, sending its shares down as much as 12 percent.

Majestic Wine, which faces competition from major supermarkets and discounters such as Aldi and Lidl, has appointed Rowan Gormley, founder and CEO of Naked Wines, as chief executive.

Gormley replaces Steve Lewis, who stepped down in February after a difficult Christmas trading period.

“The group of people we are targeting are the people in the middle and the key thing for these people is that they like to try new and different wines ... we are not going to worry about the rest of the market or the rest of the competition,” Gormley told Reuters.

Under the terms of the deal, Majestic Wine will pay about 50 million pounds in cash, to be funded through new debt, and 20 million pounds in shares.

The transaction is expected to add to Majestic Wine’s fully diluted earnings per share in 2017, it said in a statement on Friday.

Majestic Wine said the deal would give it access to new international markets where Naked Wines operates, such as the United States and Australia.

“It’s more about the Majestic Group growing globally,” said Chairman Phil Wrigley, adding that Majestic and Naked Wines will continue to operate as independent brands.

Naked Wines, founded in the UK in 2008, operates an online business model where its subscription customers help fund independent winemakers worldwide in exchange for access to exclusive wines at preferential prices.

Majestic expects an adjusted pretax profit of about 21 million pounds for the year ended March 31, lower than analysts’ average estimate of 22.66 million pounds, according to Thomson Reuters I/B/E/S.

Shares in the company were down 4 percent at 305.5 pence at 0922 GMT on the London Stock Exchange. They have fallen about 26 percent year-to-date.

$1 = 0.6804 pounds Editing by Anupama Dwivedi

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