Franchise Group Inc. has agreed to acquire American Freight Group Inc., a Delaware, Ohio-based retail chain offering brand-name furniture, mattresses and home accessories at discount prices, in an all cash transaction for approximately $450 million from an affiliate of New York PE firm The Jordan Company L.P. and other stockholders of American Freight.
Upon closing, Virginia Beach company’s systemwide revenue — total sales for both franchise and company units — will exceed $2.4 billion. The transaction is expected to be completed in the first quarter of 2020, subject to customary closing conditions.
Founded in 1994, American Freight Furniture buys direct from manufacturers and sells to customers through 176 warehouse-style stores.
“American Freight’s unmatched cash-on-cash unit economics make it an attractive opportunity for franchisees to benefit from a clear whitespace growth opportunity,” Franchise Group President and CEO Brian Kahn said, in a statement. “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.”
In connection with the deal, 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 percent 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. B. Riley FBR Inc. and Kayne acted as advisers for the transaction.
Franchise Group’s business lines include Liberty Tax Service, Buddy’s Home Furnishings, Sears Outlet and The Vitamin Shoppe. On a combined basis, Franchise Group operates over 4,300 locations predominantly in the U.S. and Canada through company-run and franchising agreements.