Swedish acquisition of FNG raises questions

With the acquisition of Ellos (Sweden), fashion group FNG wants to achieve synergies of up to 30 million euros. Analysts at ABN Amro, however, have raised questions about this, both in terms of financing and the actual benefit of the acquisition.

 

229 million euros

In July, the FNG Group, the company behind CKS, Brantano and others, announced the acquisition of Ellos Group. This Swedish e-commerce player is the online market leader for fashion, interior and decorative items, offering both its own brands and external labels. For the Belgian-Dutch group, this is the first acquisition to be made outside of its home markets.


FNG has put 229 million euros on the table for the acquisition, consisting of 124 million euros in cash, 90 million euros in shares, and an interest-free loan of 14 million euros. This means that the owner of Ellos, the investor Nordic Capital, will also hold a minority stake of 10–15% in FNG.

 

Overly-ambitious targets?

Nevertheless, ABN Amro does not consider FNG's communication about the underlying financial picture to be sufficient: stock market analysts from the Dutch bank feel that there is too little clarity surrounding the financing, and they are also questioning the intended synergies. 


"The ready-to-wear fashion sector is a highly competitive market and the targets set by FNG seem unrealistic to us", according to analysts Robert-Jan Vos and Eric Wilmer, as reported by ‘De Tijd’. There are EUR 25 to 30 million available in synergy benefits.

 

More information on the way

Top executive Dieter Penninckx, however, has responded that more information will be released as soon as the deal is fully concluded. That has not yet been the case. Only after the necessary approvals have been granted at an extraordinary general meeting of shareholders, will it be possible to hold an analysts' meeting in the near future.


In terms of synergy benefits, Penninckx stresses that "only a very small part of the synergies will come from cost savings". According to the CEO, this is mainly about cross-selling and about Ellos' own payment service, of which FNG itself  wants to make use. 


The fashion group plans to introduce Ellos' Swedish labels into Benelux and, by the same token, to take its own brands to Scandinavia: "about a quarter of our sales platform will be reserved for Ellos products."