The Reject Shop acquired by Dollaram for $259m
Canadian discount retailer Dollarama has struck a deal to acquire The Reject Shop for $259m, with plans to almost double the Australian chain’s store footprint within a decade. The move will see The Reject Shop delist from the ASX after 20 years.
Founded in Melbourne over 40 years ago, The Reject Shop operates 390 stores across Australia. Dollarama, which runs more than 1600 outlets in Canada and Latin America, sees the acquisition as a pathway to expand its presence in the Asia-Pacific market.
Transaction snapshot
Deal value: $259m
Deal multiples: 0.3x revenue, 112% premium to prior closing share price
Deal type: Full takeover; ASX delisting expected
Investors: Kin Group (20% stake); board unanimous in support
The offer of $6.68 per share represents a 112% premium to The Reject Shop’s last trading price before the announcement. If approved, shareholders will receive a 77¢ special dividend, deducted from the total offer value. The board has unanimously backed the bid.
Kin Group, owned by billionaire Raphael Geminder and the largest shareholder with a 20% stake, supports the transaction.
Dollarama has been eyeing The Reject Shop since at least 2023. The Canadian firm, listed on the Toronto Stock Exchange with a market cap of C$41 billion ($45.6 billion), sees the acquisition as a strategic move to bring its retail model to a new market.
Chief executive Neil Rossy said the deal would help reposition The Reject Shop as a go-to destination for consumables. He outlined plans to expand the chain’s network to around 700 stores by 2034 and to improve merchandising, pricing strategy, store layout, and technology systems.
The Reject Shop has had a challenging few years. In February 2023, former CEO Phil Bishop departed suddenly after just seven months. CFO and former UBS analyst Clinton Cahn has led the business since then.
For the year to 30 June 2024, The Reject Shop recorded sales of $852.7 million, up 2.6% on a comparable store basis. However, earnings fell 41% to $5.4 million, while net profit dropped 36% to $4.7 million. That figure is down from a $16.6 million profit in 2016.
Despite declining profitability, the company’s share price surged to $6.60 following the takeover news. Before the offer, analyst price targets ranged between $3.80 and $5.10 per share.
Portfolio manager Kris Webster from Canopy Investors, a Dollarama shareholder, described Dollarama as a high-performing operator with strong margins and an efficient model. The company also has active growth plans in Latin America via Dollarcity, which it controls.
The Reject Shop listed on the ASX in 2004 at $2 per share. This acquisition, pending shareholder approval, will mark the end of its run as a public company.
