KEY POINTS:
Michael Hill International is buying 17 stores in the United States for about US$5 million ($7 million) from the Chapter 11 bankruptcy of Whitehall Jewelers Holdings.
Most of stores were clustered in and around Chicago with two stores in St Louis, Missouri, chairman Michael Hill said today.
"This grouping of stores fits with our historical pattern of building a concentration of stores in new markets to leverage efficiencies in logistics, marketing and management supervision."
MHI viewed the deal as a strategic acquisition to test its retail model in the highly competitive US market, albeit at a time when the economy was challenging, said Hill.
"The company does not expect these stores to achieve profitability for several years but believes the opportunity presented by the Whitehall Jewelers acquisition was one which would enable Michael Hill International to enter this market on favourable terms."
The short to medium term focus would be on honing the retail formula for growth, Hill said.
The company considered it had secured 17 prime locations that would provide a "sound launching pad" to the large US market.
Settlement was anticipated on or before September 9, with funding from existing bank facilities and cash resources.
The purchase price was attributed primarily to the inventory and would be set at an amount equal to 80c on the dollar on the cost price of the inventory held at the 17 locations on the settlement date.
The agreement was conditional upon any necessary regulatory approvals and approval of the transaction by the United States Bankruptcy Court overseeing the Whitehall Chapter 11 case.
Michael Hill International shares were down 3c to 88c around noon, down from a year high of $1.22 last December.
- NZPA
