Nick Scali (ASX:NCK) share price jumps 12% on $103m Plush acquisition

Nick Scali's shares have started the week strongly…

| More on:
A man eases back onto his sofa, happy with the relaxed vibe from his furniture.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

In morning trade on Monday, the Nick Scali Limited (ASX: NCK) share price is charging higher.

At the time of writing, the furniture retailer's shares are up 12% to $12.28.

Why is the Nick Scali share price rising?

Investors have been bidding the Nick Scali share price higher today after it announced a major acquisition.

According to the release, the company has entered into a binding agreement to acquire Plush Think-Sofas for a total cash consideration of $103 million. Though, this consideration remains subject to certain purchase price adjustments at completion.

The release explains that the acquisition will be funded through a combination of cash on hand and new debt facilities. It remains subject to closing conditions but is expected to complete in the fourth quarter of 2021.

What is Plush?

The company advises that Plush is a specialist Australian sofa retailer, operating a network of 46 showrooms across six Australian states and territories.

It was founded in 1999 and is a mid-market, made to order sofa retailer with a focus on the aspirational customer demographic. Over its 20-year history Plush has sold sofas, modular lounges, recliners, occasional chairs, ottomans, and sofa beds to over 250,000 customers.

Management notes that the acquisition will increase Nick Scali's current footprint to a total combined 108 stores in Australia and New Zealand. In addition, it will enhance the company's growth platform through the opportunity to open new Plush stores in currently underrepresented catchment areas and with greater floorplan flexibility.

The company believes there is potential for Plush to achieve a long-term store network target of 90-100 stores. This is in addition to Nick Scali's previously communicated long term network target of at least 85 stores.

Nick Scali's CEO, Anthony Scali, commented: "Plush is a high-quality Australian sofa retailer with a strong track record of profitability and performance over a long period of time. The acquisition is a strategic opportunity for Nick Scali and will allow us to leverage the increased scale of the combined group whilst providing a platform to significantly grow the store network."

Material synergies are expected from the combined business after a two-year integration period, excluding one-off implementation costs. These synergies are expected to be generated from a combination of buying synergies, logistics and supply chain efficiencies, procurement synergies and support function efficiencies.

The acquisition is expected to be earnings per share accretive in the first full year of ownership, excluding the realisation of estimated synergies which will flow post integration.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers

Man pointing at a blue rising share price graph.
Financial Shares

How is this ASX 200 financial stock popping 6% today?

This lucky company has just swung into the green in 2024...

Read more »

a man raises his fists to the air in joyous celebration while learning some exciting good news via his computer screen in an office setting.
Share Gainers

Why BHP, Challenger, Rio Tinto, and Telix shares are pushing higher today

These ASX shares are having a strong session. But why?

Read more »

rising gold share price represented by a green arrow on piles of gold block
Share Gainers

Here are the top 10 ASX 200 shares today

The ASX 200 kept up the selling this Wednesday, with another day in the red.

Read more »

Green arrow going up on a stock market chart, symbolising a rising share price.
Share Gainers

Why Bank of Queensland, DroneShield, Evolution Mining, and Lynas shares are storming higher today

These ASX shares are having a very strong session on hump day.

Read more »

A man wearing a red jacket and mountain hiking clothes stands at the top of a mountain peak and looks out over countless mountain ranges.
Share Gainers

Here are the top 10 ASX 200 shares today

It was mayhem on the markets today, with one of the worst days in a long time for ASX shares.

Read more »

Man pointing at a blue rising share price graph.
Share Gainers

Guess which little ASX iron ore stock is surging 68% on big news

Investors are bidding up the iron ore miner following a promising project update.

Read more »

a woman holds her hands up in delight as she sits in front of her lap
Share Gainers

Why Decmil, SCEE, Spartan Resources, and Telix shares are pushing higher

These shares are avoiding the market sell-off today.

Read more »

A neon sign says 'Top Ten'.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a rough start to the trading week for ASX shares today.

Read more »