Hagar hf. Expands Operations with P/F SMS Acquisition

Hagar hf. Expands Its Business Footprint

Recently, a significant announcement was made about Hagar hf. enhancing its business strategy through the acquisition of P/F SMS, a prominent supermarket chain in the Faroe Islands. This strategic move was publicized on a notable occasion, indicating the completion of a conditional agreement that allows Hagar hf. to fully acquire SMS. Following the signing of the definitive purchase agreement, all preconditions, including due diligence and regulatory approvals, have been satisfactorily completed. This acquisition underlines Hagar's commitment to solidifying its foothold in grocery retail while simultaneously improving operational efficiency and product offerings at SMS.

Financial Aspects of the Acquisition

The total enterprise value of the acquisition is approximately 467 million DKK, with an equity value of around 327 million DKK. This valuation is based not only on historical operations but also on projected earnings for the current fiscal year, where SMS is expected to generate about 730 million DKK in revenue and achieve an EBITDA of about 63 million DKK. Hagar’s offer included a blend of cash amounting to 267 million DKK and shares, with an estimated market worth of 60 million DKK, reflecting Hagar’s strong position in the market.

Future Integration Plans

Experts predict that the completion date of this noteworthy acquisition will be December 2, 2024. Upon finalization, P/F SMS will be integrated into Hagar's consolidated financial statements for the last quarter of the fiscal year. A detailed overview of the transaction and financing will be provided in Hagar's quarterly results report.

About P/F SMS and Its Market Position

P/F SMS is recognized as a leading retail entity in the Faroe Islands, operating several discount grocery stores, including eight Bónus outlets and the flagship Miklagarður. The company also owns a diversified range of businesses, including the largest shopping center in the region, various restaurants, and fitness facilities. With a workforce of over 700 employees, SMS plays a critical role in the local economy.

Strategic Synergies and Goals

The acquisition aligns with Hagar's broader vision, which was shared earlier in the year, to explore new opportunities that bolster its operational capabilities both within its core business and through new revenue streams. The transaction promises to enhance the service capabilities of both Hagar and SMS, allowing them to capitalize on efficiency improvements in grocery supply and management.

Leadership and Future Directions

Former shareholders of SMS, NM Holding and P/F Farcod, will continue to hold interests in the new corporate structure through their shareholdings in Hagar. Niels Mortensen, the managing director of SMS, remains committed to leading the company's operations in the Faroe Islands, even with the new shareholding arrangements. This continuity of leadership promises to blend the existing management expertise with Hagar’s expansive resources to further develop the business.

Anticipated Outcomes of the Acquisition

With this acquisition, Hagar expects to streamline operations and increase synergies that will lead to higher revenue streams. The operational outlook for the year 2024/25 has already been adjusted to reflect the integration of SMS into the Hagar portfolio, with projected EBITDA set between 14,000-14,500 million DKK.

Official Statements from Leadership

Finnur Oddsson, the CEO of Hagar, expressed his enthusiasm for welcoming SMS into the Hagar family. He noted, "We take pride in our investment in SMS, a well-run company vital to the Faroese community. Our objectives align closely, focusing on delivering the most competitive prices for our customers while fostering continuous development in retail services."

Niels Mortensen, CEO of SMS, echoed these sentiments, stating, "The agreement with Hagar marks a pivotal moment for us, enabling SMS to leverage Hagar’s resources for our ambitious growth plans while maintaining our commitment to improving the living standards of the Faroese people through accessible grocery options."

Frequently Asked Questions

What is the significance of Hagar's acquisition of SMS?

This acquisition significantly expands Hagar's market presence and operational capabilities in the grocery retail sector in the Faroe Islands.

How much did Hagar pay for SMS?

The total enterprise value of the acquisition is approximately 467 million DKK, with an equity valuation around 327 million DKK.

When is the completion date for the acquisition?

The anticipated completion date of the acquisition is December 2, 2024.

Who will continue to lead SMS after the acquisition?

Niels Mortensen will remain the CEO of SMS, ensuring continuity in leadership during the integration process.

What are Hagar's future plans following the acquisition?

Hagar aims to enhance operational efficiencies and customer service while exploring new growth opportunities through SMS.

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