Franchise Group to Buy American Freight Group Inc.

December 31, 2019  by Laurie Northington in Business Strategy, Industry   

The all cash transaction, valued at $450 million, is expected to be completed in the first quarter of 2020, subject to the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as well as other customary closing conditions.

After the acquisition, Franchise Group’s systemwide revenue, which is defined as total sales for both franchise and company units, will exceed $2.4 billion.

In connection with the signing of the transaction, Franchise Group intends to sign a new $700 million credit facility with affiliates of Kayne Anderson Capital Advisors, L.P. and Great American Capital Partners, LLC a subsidiary of B. Riley Financial, Inc., that will provide 100% of the financing needed for the transaction, including the refinancing of the company’s term loans for its Buddy’s Home Furnishings and Sears Outlet businesses. 

“We are proud to welcome American Freight, its management team and employees to the Franchise Group,” said Brian Kahn, president and CEO of Franchise Group. “American Freight is a deep value, category-defining furniture retail model with a compelling, proven track record of growth and stability throughout economic cycles.”

“American Freight’s unmatched cash-on-cash unit economics make it an attractive opportunity for franchisees to benefit from a clear whitespace growth opportunity. We expect that combining American Freight with our similarly large-format Sears Outlet business and our small-format Buddy’s Home Furnishings business will generate significant economic synergies over time that will be realized from leveraging corporate overhead, vendor and franchisee partnerships, operating methods, and a common customer base,” added Kahn.