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Hudson News Owner To Delist Following $311 Million Merger With World’s Biggest Airport Retailer

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Switzerland-based Dufry is set to take Hudson HUD Group into private ownership by increasing its stake in the North American travel retailer from 57.4% to 100%. It is offering $7.70 for the each share it does not already own.

The move—technically a merger—values the remaining stake at $311 million and will take the airport convenience store and branded retailer, best known for the Hudson News brand, off the New York Stock Exchange.

Dufry Group (CH:DUFN) says its offer price represents a premium of about 50% to Hudson’s closing share price on Tuesday of $5.13. Yesterday the shares shot up to just under $7.50, still giving shareholders a premium in the current market. But this is well off the $15 price at the start of the year.

Hudson, with more than 1,000 stores in airports, commuter hubs, landmarks and tourist destinations, was only listed in 2018 despite Dufry owning the company for several years prior. The shares have traded below their IPO price of about $18 for most of their lifetime—and particularly so since widespread air traffic collapses from mid-March.

In a statement yesterday, Dufry said: “Hudson’s separate listing and related regulatory requirements… are no longer justified in light of the limited trading liquidity of Hudson and the changed environment due to the Covid-19 pandemic.”

We had speculated in a previous Hudson story (paragraph 14 onwards) that Dufry might look at a disposal of its stake in Hudson Group to raise cash at a difficult time for the global duty-free player hit by Covid-19’s impact on passenger traffic globally.

Instead, Dufry’s move to buy the entire business is, the company says, “intended to further simplify its corporate structure and align operations to the new business environment.” It is expected to achieve cost savings of at least $18 million and improve cash flows going forward.

Hudson’s value during the Covid-19 crisis

We also previously said in the same report that retaining Hudson would have some strategic benefits in the current crisis. The company’s duty-paid business is unusually strong accounting for 78% of sales, the rest being duty-free. Duty-paid retailing is likely to rebound faster because domestic air travel is picking up more quickly that international.

In the US, despite high Covid-19 case numbers in some U.S. states, air passenger counts have risen since July. Between Monday and Wednesday this week they have hovered at between 25% and 30% of their 2019 level over the same few days.

The intra-North America aviation market is driven by U.S. domestic traffic and it is the biggest in the world ahead of intra-Europe and China. This puts Hudson in a strong position versus Dufry’s global business which is 61% skewed to struggling international duty-free sales.

Hudson—which has just announced a restructure with 40% of staff being laid off—is also attractive in that it is a well diversified retail business. It has a strong convenience and news components as well as foodservice, duty-free and specialty retail with airport boutiques from luxury brands like Bally, Coach and Tumi, to FAO Schwartz to MAC Cosmetics.

Dufry CEO, Julian Diaz, said: “The delisting emphasizes the strategic importance of the North American business for Dufry Group and the integration of the duty-free and duty-paid businesses globally, with the Hudson convenience stores being an established brand across our operations worldwide.”

No changes in strategic development

He added that integrating Hudson more closely with Dufry would not hinder Hudson’s current development strategy for North American and that plans for “further penetration of the food & beverage market” would continue.

The proposed deal will be financed through an equity capital increase by way of a rights issue once approved by Dufry’s shareholders at an extraordinary general meeting. The transaction has been fully underwritten by a bank consortium. ‘

Hudson’s board has unanimously approved the merger. CEO Roger Fordyce stated: “While our ownership structure will change as a result of the proposed transaction, the re-integration of Hudson into Dufry will further facilitate the execution of our business strategy. Hudson successfully implemented its business and growth plans as a wholly-owned Dufry subsidiary for nearly nine years prior to our initial public offering in 2018.”

Upon completion of the transaction—expected to close in the fourth quarter of 2020—Hudson will become an indirect wholly-owned Bermuda-incorporated subsidiary of Dufry.

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