Canada's Le SuperClub Buys Jumbo21 May, 2004 By: Holly J. Wagner
Jumbo Entertainment, Canada's eighth largest video specialty chain, will sell its assets to No. 4 Canadian player Le SuperClub Videotron Itee, the chains announced today.
“For a number of years we reported that our board has been reviewing situations whereby Jumbo could take advantage of prospects to enhance potential long-term financial value for our shareholders,” said Jumbo chairman Kenneth Fowler. “We are pleased to recommend today this transaction with Le SuperClub Videotron which we believe will reposition the corporation, strengthen its balance sheet and allow us to take advantage of strategic and transactional opportunities in the near future.”
Le Superclub Videotron plans to operate the Jumbo stores under their existing banners, which include Jumbo Video, Jumbo Video New Releases, Microplay and Starstruck.
“We are pleased to have the franchisees, management and staff of Jumbo's 105 locations join those of our 185 retail locations within SuperClub's network,” said Le SuperClub Videotron president Richard Soly. “The combined strength of our networks will vault us into the second largest home software entertainment retailer in Canada with a presence in all 10 provinces. It is our intention to continue to grow our businesses across Canada and to bring our considerable expertise and buying power to our combined franchisee constituents. We are most pleased that James Gormley, president and CEO of Jumbo and a veteran of video and games retailing and franchising in Canada, has agreed to join with us in our expanded business and vision for growth.”After payment of all debt and other liabilities, Jumbo expects to retain about $3 million to pursue other opportunities and will benefit from tax loss carry-forwards, both of which it will seek to apply to potential acquisitions. Jumbo also agreed to change its name.
Jumbo's board of directors approved the deal following an opinion from LECG Canada Inc., a chartered business valuation firm, that the transaction is fair to the Jumbo shareholders. Le SuperClub Videotron also entered agreements with some Jumbo shareholders, controlling almost 45 percent of Jumbo's issued and outstanding common shares, who have agreed to support the asset sale.
Jumbo intends to remain a public company following the sale and to seek to remain listed on the Toronto Stock Exchange.
An Information Circular containing further details of the proposed sale is expected to be mailed to Jumbo shareholders in early June. Subject to shareholder approval and other conditions to closing, the transaction is expected to be completed in July.