Noni B buys James Packer-backed fashion chain Pretty Girl

Retailer Noni B has more than doubled its store network by buying the James Packer-backed chain Pretty Girl.

Noni B will expand its network of stores to almost 600.

Retailer Noni B has expanded its network of stores to almost 600 after agreeing the purchase of the James Packer-backed fashion chain Pretty Girl.

The deal values the target at $74.7 million, with the acquisition price potentially expanding a further $7.3m depending on sales at Pretty Girl through the coming two financial years.

Investors have applauded the move in early deals, pushing Noni B (NBL) shares up 7 per cent, with the transaction more than doubling Noni B’s store network.

The key to the strong share price performance was news of a capital raising that had been fully underwritten at a value 21 per cent above the group’s closing price yesterday.

The agreement largely comes in the form of cash, although it also includes a share placement to Pretty Girl seller Consolidated Press Holdings — Mr Packer’s private investment firm — worth $9.7m that is priced at the same 21 per cent premium as the planned capital raising.

Pretty Girl recorded a profit of $7.6m last year, meaning the deal values the group around 10 times earnings.

The result was the best performance in several years, with its network of Rockmans, BeMe and W. Lane brands now added to Noni B’s eponymous store network.

The deal came in at almost double Noni B’s market value, leading the acquirer’s managing director Scott Evans to label it “transformational” for the ASX-listed retailer.

“The expanded brand portfolio and our significantly increased store footprint create the opportunity to invest strategically in customer experience and omni-channel, to drive additional growth and profitability for the group,” he said.

“We also expect the acquisition to generate significant commercial synergies and cost savings over time as the two businesses are integrated.”

The deal will be funded by bank debt of $30m, with approval from lender ANZ, and a capital raising worth up to $40m.

The raising has been fully underwritten by controlling shareholder Alceon at a price of $1.25 a share, a show of support for the company which began the trading day at $1.03.

Noni B chairman and Alceon executive director Richard Facioni said the premium signified the controlling shareholder’s excitement in the growth potential provided by the agreement, while also spruiking the addition of Mr Packer’s private firm to the register.

“This transaction now creates a business of significant scale and growth potential,” he said.

“We look forward to welcoming CPH as a shareholder and see it as a real vote of confidence in the Noni B and Pretty Girl businesses and the value that will be created by the combination.”

At 10.35am (AEST), Noni B shares surged 6.8 per cent to $1.10 against a broader market fall of 0.8 per cent.