Hema Memo 070220
- Understand why Jumbo’s announced partnership with Hema and acquisition of 17 of Hema’s store leases may be a precursor to a full acquisition of Hema by Jumbo. Strategic and financial analysis for Jumbo in pursuing an acquisition of Hema
- Understand whether Hema’s valuation can be increased significantly by rationalising Hema’s International store and online footprint
- Understand why Jumbo is acquiring prime city centre store leases from Hema – economics of city centre vs rest of estate and food vs general retail stores
- Understand why Hema’s liquidity and financial position remain weak and its ability to deleverage sufficiently to refinance 2022 debt maturities is at material risk even with muted cash payments for the store leases to be sold to Jumbo
- Understand our assessment of probabilities across scenarios
- Jumbo – Hema M&A analysis – strategic logic; store in store synergies; central cost synergies; other revenue synergies; Jumbo’s ROI and pro forma position; IRR to Ramphastos; synergies and strategic logic benchmarked to a comparable transaction
- Jumbo’s historic transformational debt-financed acquisitions and track record of deleveraging subsequently
- Analysis of whether Hema’s valuation (either under Ramphastos ownership or in restructuring) could be significantly increased by rationalising Hema’s International store and online footprint
- Estimation of Adj EBITDA potential from partnerships with Franprix and Jumbo
- UK and France sales density and Adj EBITDA comparison of city centre vs rest of country stores and food retail vs general retail stores and read-across to potential for Jumbo on its purchase of Hema’s store leases in 17 city centre locations
- Everest updated financial projections
- Does it make sense for Jumbo to acquire Hema outright having used the partnership planned for 2020 as a “trial”?
- What would Jumbo’s financial position be, pro forma for an acquisition of Hema? Should landlords of Jumbo and Hema stores care?
- How much can Jumbo pay for Hema’s store leases?
- What EBITDA density could Jumbo achieve selling primarily food in prime city centre locations compared to what Hema might achieve in such locations?
- Can Hema grow into its capital structure by closing some of its International stores to reduce support office and logistics costs?
- How much Adj EBITDA could Hema generate through its partnerships with Jumbo and Franprix?
- How is Hema’s liquidity likely to evolve?
- How is Hema’s financial performance evolving since we initiated coverage?
- View, Variant Perception & Recommendations
- Q3 19 Results, Financial Model & Valuation Update
- Partnerships Adj EBITDA Potential
- Should Hema Close Some Of Its International Stores?
- How Much Can Jumbo Pay For Hema’s Store Leases?
- Does It Make Sense For Jumbo To Acquire Hema Outright?
- UK Scheme Of Arrangement & Pre-Pack Administration Or Dutch Bankruptcy Proceedings?
- Additional Points
Appendix – Some Updated Material From Initiation Memo