The JB Hi-Fi Limited (ASX: JBH) share price is up 0.4% amid news that the ASX retail share is reportedly thinking about trying to buy the smaller competitor Jaycar.
JB Hi-Fi is one of the largest retailers in Australia. It operates JB Hi-Fi Australia and The Good Guys, as well as JB Hi-Fi New Zealand.
But the company is thinking about expanding more by aiming for Jaycar, according to reporting by The Australian.
Image source: Getty Images
What is Jaycar?
Jaycar has over 110 stores across Australia and New Zealand, with around 1,000 staff.
It sells a wide array of products across tools and test equipment, sound and video, cables and connectors, components and electromechanical, power and batteries, hobbies and gadgets, security and surveillance, computing and communication, science and learning, outdoors and automotive.
Its mission is to provide a wide selection of quality electronic products at an affordable price.
The company also sells products online in both the UK and the US.
The founder and managing director of the company, Gary Johnston, passed away last year.
How close is JB Hi-Fi to buying Jaycar?
According to The Australian, there is an auction process for Jaycar, with the auction set to 'ramp up' in May. So, at this stage, JB Hi-Fi is planning to join the race for Jaycar.
The sale of the electronics retailer is being facilitated by Barrenjoey. The information memorandum is expected to be sent to the market in May.
It reportedly generates $60 million of earnings before interest, tax, depreciation and amortisation (EBITDA).
The newspaper reported that investors think that JB Hi-Fi (and Super Retail Group Ltd (ASX: SUL) want to find places to put to work the profit they have made over COVID-19.
But JB Hi-Fi isn't the only one that's reportedly interested in buying Jaycar. There are private equity groups that may be in the running like Quadrant and BGH Capital, according to The Australian.
What would this mean for JB Hi-Fi?
Time will tell whether JB Hi-Fi is a serious bidder in the auction process, and then whether it can be successful against the other bidders.
The Australian reported that Jaycar generates $60 million of EBITDA.
In the recent FY22 half-year result, JB Hi-Fi made $420.5 million of earnings before interest and tax (EBIT) (which was down 9.1%).
The company recently announced a capital return of up to $250 million through a share buyback, which management hope will support the JB Hi-Fi share price.
Recent sales
On 24 March 2022, the company announced a sales update to keep investors up to date.
In the FY22 third quarter to date, JB Hi-Fi Australia sales were up 11.3%, JB Hi-Fi New Zealand sales were up 2.9% and The Good Guys sales had grown by 5.7%.
JB Hi-Fi said that it continues to see heightened customer demand and strong sales growth. This sales growth, combined with disciplined cost control and an elevated gross profit margin, helped operating leverage across the group, according to management.
