(Reuters) - Canadian Tire Corp offered to take full ownership of the country’s largest sporting goods retailer, Forzani Group Ltd, for C$771 million ($798.5 million) in cash as it looks to battle rising competition from U.S. rivals.
Canadian Tire, which currently holds about 4 percent of Forzani Group’s shares, offered C$26.50 for each Forzani share — a premium of 50 percent over the stock’s Friday’s close.
“Canadian Tire is on offence,” Chief Executive Stephen Wetmore said in a statement.
“The transaction will establish Canadian Tire as Canada’s ultimate authority in sports, with more than 1,000 combined retail sports outlets across the country.”
Canadian Tire said it would operate Forzani’s retail banners as a separate business unit. Forzani, which houses brands like Sport Chek and Sports Experts, will also give Canadian Tire a foothold in the important 18-35 year-old customer segment.
Forzani Group operates more than 500 retail outlets under banners such as Sport Chek, Atmosphere and National Sport and has annual revenue of about C$1.4 billion.
Forzani’s board has approved the offer and its senior officers and directors — who collectively own about 8.24 percent of the stock — have agreed to vote in favor of the deal, it said in a statement.
Canadian Tire expects annual savings of about C$35 million, with about C$25 million expected in 2012.
Canadian Tire will finance the deal with C$500 million of cash on hand and the rest with short-term financing. It expects to return to pre-acquisition leverage levels within 18-24 months of the deal closing.
The deal is expected to close in the third quarter and add to Canadian Tire’s earnings in 2011.
Canadian Tire was advised by BMO Capital Markets while Forzani was advised by Greenhill & Co Canada Ltd.
Shares of Canadian Tire closed at C$71.30 while those of Forzani Group closed at C$17.61 on Friday on the Toronto Stock Exchange.
Reporting by Arnika Thakur in Bangalore; Editing by Sriraj Kalluvila