Party City sells Canadian stores
Late last week, Party City shared a press release stating the future of its business in Canada:
Party City Holdco Inc. announced that it has entered into a definitive agreement with Canadian Tire Corporation, whereby Canadian Tire will acquire the retail business and assets of Party City’s Canadian subsidiary. As part of this transaction, Canadian Tire will acquire 65 retail store locations in Canada in an all-cash transaction valued at approximately CAD$174 million. The 2018 pro forma EBITDA of these 65 locations totaled approximately CAD$17.6 million.
In connection with the agreement, Party City and Canadian Tire have also agreed to a long-term wholesale supply agreement, with an initial term of 10 years. Under the terms of the supply agreement, Party City’s wholesale business, Amscan Inc. (“Amscan”), will provide Canadian Tire with consumer products. As one of the top Canadian retail companies, Canadian Tire will be a marquee customer, particularly as it executes its growth strategies. Party City anticipates that the supply agreement will effectively double Amscan’s average annual wholesale shipments into the Canadian marketplace during the term of the agreement.
“We are extremely excited to enter into this transaction with Canadian Tire, which is widely recognized as a premier retailer in Canada,” said James M. Harrison, Chief Executive Officer of Party City Holdco Inc. “Over the last 14 years, we have successfully executed on our strategy to grow our portfolio of stores in North America and pursue strategic partnerships internationally with leading retail partners. This transaction enables us to achieve both objectives, particularly as we partner with Canadian Tire to grow the Party City brand throughout Canada. We view this investment by Canadian Tire as a true endorsement of the Party City retail concept and the party category overall. More importantly, we are pleased and proud to partner with them through this long-term wholesale supply agreement, which positions us as their primary resource for party and related consumer products and innovation.”
The proceeds from the sale will be used to pay down debt as part of the Company’s stated strategic goal of significantly reducing its net debt leverage over the next several years.
The transaction, which has been unanimously approved by Party City’s Board of Directors, is subject to customary closing conditions and is expected to close by October 1, 2019.
The New York-based company will use the proceeds from this sale to pay down its debt caused from a competitive retail environment.