Two of the largest IT retailers in France may combine; possible growth in rest of Europe Groupe Fnac has made an offer to buy rival IT retailer Darty plc for around €700m. The merged organisation would have something over 20% of the French market as well as other units in Europe, and there is some confidence that the deal will go through. Both companies have languished in the competitive local environment for the last few years.
The electricals market in France is more fragmented than that in the UK for example. We estimate that Darty has a market share of c.15% in France, versus Dixons in the UK with c.30%, says analyst Cazenove. “Combining two of the leading French players, in our view, would therefore be sensible, particularly given the highly commoditized and competitive nature of the category.”
Fnac believes that the combination of Fnac and Darty constitutes a compelling strategic and financial opportunity for both groups by creating a leader in the French electronics, editorial and home appliances retail market. The combination, based on a strong industrial rationale, would benefit from several key differentiating factors:
* two strong brands, benefiting from a strong recognition of their respective customer bases;
* an enlarged product offering, including technical goods, editorial goods and white goods;
* a complementary and efficient store network;
* an enhanced multichannel offering through two complementary websites; and
* broader international exposure, with a focus on Europe and a presence spanning seven countries, with combined sales of over €7bn.
The Possible Offer consists of an all-share acquisition of 100% of Darty's issued and to be issued share capital. Fnac's proposal would entitle each Darty shareholder to receive 1 Fnac share for every 39 Darty shares held.