Hemtex acquires 24 franchise stores

Hemtex AB is significantly strengthening its position in Sweden through a planned acquisition of 24 stores that are currently operated by franchise companies within the framework of the Hemtex franchise system. Letters of intent have been signed with the owners of these stores, with the aim of signing agreements on July 15, 2006 concerning the acquisition of these retail companies. The stores have combined annual sales of approximately SEK 260 million and are expected to make a positive contribution to the Hemtex Group’s sales and earnings as early as the current fiscal year.

“Some time ago, we announced our interest in acquiring slightly more than 20 of the Swedish Hemtex stores operated by franchisees. Although this acquisition includes most of the stores we had on our wish list, the acquisition of additional stores in the years ahead cannot be excluded. The acquisition of these stores is in line with our strategy of achieving growth through the establishment of new stores and the acquisition of franchise stores,” says Hemtex President and Chief Executive Officer, Anders Jansson. Agreement and financing of the acquisitions Letters of intent concerning the acquisition of a total of 24 stores have been signed with seven franchise companies within Hemtex. The stores are located in Avesta, Boden, Borlänge, Borås (2), Falkenberg, Falun, Gävle (2), Helsingborg (2), Karlstad (2), Kista, Luleå (2), Nacka, Sollentuna, Stockholm (Sickla), Uppsala (2), Varberg, Värnamo and Ängelholm. Hemtex intends to gradually take over the companies that own these stores during the period August 1 to November 1, 2006. The purchase consideration for the shares, fixed assets and inventories is estimated at SEK 185-195 million. The intention is to finance half of the acquisition price through internally generated funds and half through loans. Since Hemtex AB delivers most of the products sold by the acquired stores, the Group’s sales will not be affected by the entire sales value of SEK 260 million mentioned above. The estimated sales increase in the Group amounts to approximately half of the acquired sales. The sellers include a Member of the Board who also directly and indirectly owns shares in Hemtex AB. This Member of the Board currently owns two stores in Karlstad, which will be acquired on the same terms as those for the other stores described in the above acquisition proposal. The other sellers also hold shares in Hemtex AB either directly and indirectly.