++Stealth Group (ASX: SGI)++ will spend $22 million to acquire Australian privately-owned buying group Hardware & Building Traders (HBT) to create a market-leading alternative in hardware and industrial distribution.
Stealth considers the acquisition a “once-in-a-generation opportunity” positioning it as an alternative to major hardware and industrial players ++Wesfarmers (ASX: WES)++ (which owns the Bunnings and Blackwoods brands) and ++Metcash (ASX: MTS)++ (Independent Hardware Group and Total Tools).
HBT will be a “bolt-on fit” to Stealth’s wholesale division and buying power, bringing 1,165 independent stores, 490 supplier partnerships, and $700m in annual purchases to Stealth’s network across the hardware, industrial, safety, automotive and workplace categories, while delivering products and solutions to customers at every level of the $93 billion addressable market.
Flexible Low-Capital Business
By combining Stealth’s wholly-owned operations with independent retail and trade operators, the company positions itself to deliver a lean and flexible business minus the capital intensity and fixed-cost burden of owned-infrastructure models used by larger competitors.
The combined entity will be an Australian wholesale and buying group platform representing over $800 million in annual purchases and approximately $1.3b in retail sales plus 1,300 supplier partnerships and more than 1,200 stores nationwide.
Stealth chief executive officer Mike Arnold said the HBT deal would significantly expand the group’s scale, capability, and relevance across wholesale, retail, and direct-to-business channels.
“Our objective is to make independent operators and our own business more successful and highly-competitive for customers, with a strong marketing channel for suppliers who prefer not to be beholden to one or two major players,” he said.
Expanded National Footprint
The transaction marks an “exciting next chapter” for Stealth which will unlock new opportunities for independent operators, suppliers and shareholders.
“The integration of HBT will materially-expand our national footprint and position us to accelerate growth, improve margins and deliver stronger, more predictable cash flows […] with a scalable distribution model that few in the market can match,” Mr Arnold said.
Stealth believes the acquisition will be immediately accretive and cash-generative, with approximately $8m in annual profit synergies by FY27 and more than $200m in incremental sales in FY28.
As a result, the company has upgraded its FY28 guidance for sales (up from $300m to more than $500m), EBITDA margin (up from 8% to between 8% and 12%), and NPAT margin (up from 5% to between 5% and 8%).
