The North West Company has announced the sale of 34 of its 46 Giant Tiger stores to Giant Tiger Stores Limited (GTSL).
The two companies have agreed that GTSL will acquire the stores for a cash consideration of $45 million and subject to meeting certain profitability milestones, total contingent cash consideration payable of up to $22.5 million.
“Our 20-year relationship with GTSL has been a very important one and this new agreement creates the conditions for mutual success going forward,” says North West president & CEO Edward Kennedy. “Specific to the Giant Tiger stores we are selling to GTSL, we recognize that GTSL’s proven capability as a leading Canadian-owned discount retailer, including their ability to successfully franchise stores, will enable these locations to reach their full performance potential. For North West, the GTSL Transaction reinforces our commitment to focus on leading and growing within our own core remote and rural retailing businesses while fully leveraging the GTSL partnership.”
As a part of the GTSL transaction, North West and GTSL will enter into reciprocal product supply and distribution agreements related to the supply of food-related product by the North West to the acquired stores and the supply of certain general merchandise and food products by GTSL to North West’s northern Canada stores.
These agreements will enable buying and distribution efficiencies for both parties and will provide the North West with access to a stronger, expanded general merchandise assortment.
North West also announced today that it will be reducing administration costs in its Canadian operations by approximately $17 million on an annualized basis and that it expects to record a provision of approximately $5 million in the first quarter of 2020, related primarily to employee severance costs. This cost reduction will largely take effect in the first and second quarters of 2020 and is partially related to recent and ongoing technology investments, and the impact of the previously noted GTSL Transaction and related product supply and distribution agreements.
North West plans to re-focus on the core store selling activities in northern Canada and invest in lower retail food pricing to help drive market share growth in this region, beginning with an approximately $10 million in annualized pricing investment over the next 12-18 months.