Dollarama sets sights on Australia with The Reject Shop acquisition

MONTREAL - Dollarama Inc. (TSX: DOL), a prominent Canadian value retailer trading near its 52-week high of $57.04 and showing strong YTD returns of 12.36% according to InvestingPro, has announced a definitive agreement to purchase The Reject Shop Limited (ASX: TRS), Australia’s largest discount retailer. The all-cash transaction is set at A$6.68 per share, valuing The Reject Shop at approximately A$259 million (C$233 million).

The acquisition, which will be carried out through an Australian scheme of arrangement, has received unanimous support from The Reject Shop’s Board of Directors, who recommend shareholders vote in favor. The deal represents a 108% premium over The Reject Shop’s recent average share price and is expected to close in the second half of 2025.

Neil Rossy, President and CEO of Dollarama, expressed confidence in the acquisition, highlighting the opportunity to expand into a new market and build on Dollarama’s success in Canada and Latin America. With a track record of 19 consecutive years of dividend payments and demonstrating consistently low price volatility as noted by InvestingPro analysts, Dollarama brings proven operational stability to this expansion. The addition of The Reject Shop’s 390-plus stores across Australia is anticipated to serve as a platform for future growth, with Dollarama aiming to increase the store count to around 700 by 2034.

The Reject Shop, headquartered in Melbourne, reported A$866 million in sales for the 12-month period ending December 29, 2024, and employs over 5,000 people. Dollarama plans to leverage its retail and operational expertise to enhance The Reject Shop’s performance.

Financially, the acquisition is to be funded through Dollarama’s cash reserves and credit facilities, with minimal immediate impact on Dollarama’s net earnings per share. The transaction’s enterprise value is approximately A$189 million (C$170 million) pre-AASB 16, or A$421 million (C$379 million) post-AASB 16, with EBITDA multiples of 8.9x and 3.3x, respectively.

The agreement allows for a potential special dividend by The Reject Shop, which would be deducted from the cash consideration. Dollarama’s purchase price remains unaffected by The Reject Shop’s interim dividend, set to be paid on May 1, 2025.

Completion of the acquisition is subject to customary closing conditions, including shareholder and regulatory approvals. Dollarama’s financial advisor for the transaction is National Bank Financial Inc. For investors seeking deeper insights into Dollarama’s valuation metrics and growth potential, InvestingPro offers exclusive analysis tools and additional ProTips to evaluate this strategic expansion’s impact on shareholder value.

This announcement was made today during a conference call, where only financial analysts could pose questions. The call was also available for public listening via webcast.

The information in this article is based on a press release statement.

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