The completion of the International Duty Free transaction is scheduled for Q4 2019.

Lagardère Travel Retail believes the €250m ($279m) acquisition of Belgian travel retailer International Duty Free (IDF) will ensure it generates annual revenue of €5.3bn ($5.9bn) and cement its position as the world’s second largest travel retailer (excluding downtown duty free).

The €5.3bn projection is based on Lagardère Travel Retail’s 2018 revenue figure of €3.67bn and includes the pro forma contribution of Hojeij Branded Foods on a full-year basis. This translates into consolidated pro forma revenue of €4.1bn.

Lagardère says the consolidation of the IDF business will ensure its remains the third largest operator of duty free and fashion airport points of sale.

According to the TRBusiness Top 10 Operators Report produced in 2018, Lagardère Travel Retail ranked third after Lotte Duty Free with revenue of $4.40bn in 2017.

EXTENDED PRESENCE

The completion of the transaction, which is subject to a number of customary conditions, including regulatory approval is scheduled for Q4 2019. Once finalised, it will extend Lagardère’s presence to Brussels, a further leading European hub with recently refurbished stores. TRBusiness understands the airport handles around 25m passengers annually (60% EU flights and 40% non-EU flights).

IDF’s ‘experienced and high-profile’ management team will remain at the helm, ensuring a successful acquisition and integration into the Lagardère group.

As reported, IDF holds long-term contracts and operates more than 30 boutiques. These include 25 duty free, fashion and confectionery points of sale at Brussels Airport, two duty free stores at Charleroi Airport, and The Belgian Chocolate House premium confectionery stores at the main Gare du Midi railway station in Brussels and in the centre of Antwerp and Luxembourg. IDF also runs a boutique in Kenya.

IDF Founder Aldo Vastapane, a Belgian and Visionary businessman, created the first duty free shops at Brussels Airport in 1958.

In addition to the Belgian Chocolate House, IDF’s portfolio comprises its own brands. These include Fashion Studio, The Luxury Hall, Summer Time and Precious Time (fashion and watches) and Epicure (gastronomy).

IDF, a subsidiary of Compagnie Nationale à Portefeuille, also has partnerships with premium fashion brands such as Longchamp, Tumi and Hugo Boss and perfumes and cosmetics labels including Mac, Jo Malone and Rituals.

Lagardère suggests the ‘close affinity’ between the two companies in terms of culture and strategy will help ensure the success of the acquisition. It also says the acquisition will enhance its strategy and that IDF’s culture and operating standards will be fully aligned with its four key pillars.

Lagardère Travel Retail will be hoping to develop The Belgian Chocolate House in new markets once the acquisition is complete.

FOUR KEY PILLARS

The first pillar is Operational Excellence. According to the retailer, IDF brings a high-quality portfolio of stores, which have recently been refurbished or are in the process of being so. The second pillar is Partner of Choice, with Lagardère acknowledging IDF’s close working relationship with landlords and suppliers.

Profitable Growth is the third, with Lagardère highlighting IDF’s profitable businesses which will all be accretive to its financial ratios. The retailer also emphasises the long-term contracts associated with IDF and the operational management teams.

The final pillar is Agile and Efficient Organisation. Lagardère highlights IDF’s entrepreneurial and innovative culture, which it says is closely aligned with theirs, allowing greater operating agility.

Brussels South Charleroi International Airport will unveil a new 1,500sq m duty free store in 2020.

As mentioned previously, the acquisition is valued at €250m (enterprise value is based on zero cash and debt). It is expected to deliver solid cash generation, be accretive to Lagardère Travel Retail’s recurring EBIT and extend the average life of the group’s concession agreements.

Lagardère predicts that the combined operating and sales expertise of both parties will significantly boost sales and help unlock recurring synergies. It also believes the acquisition will increase its presence in the international premium chocolate segment.

This will be achieved by leveraging IDF’s experience and contacts with suppliers in the segment. The development of the premium The Belgian Chocolate House concept in new markets will also play a part.

IDF’s portfolio comprises several of its own brands including Epicure which specialises in gastronomy.

PASSING OF THE BATON

Xavier Le Clef, Managing Director and Chairman, IDF said: “IDF is special to us at Compagnie Nationale à Portefeuille because we have supported its development since 1991. We’re now passing the baton to Lagardère Travel Retail, convinced that they will be a great partner in maintaining IDF’s growth over the long term while preserving its unique DNA and strong commitment to employees and partners.

“I’d like to thank the IDF teams wholeheartedly for their amazing work all these years as they built the company up to occupy the leadership position it now enjoys in the travel retail market.”

Dag Rasmussen, Chairman and Chief Executive Officer, Lagardère Travel Retail commented: “The acquisition has cemented our position as the world’s third-largest operator of duty free airport points of sale and European leader in travel retail.

“We’re delighted to be entering the Belgian and Kenyan markets, which offer wonderful development opportunities and at the same time stepping up our operations in Luxembourg. Above all, we are confident that IDF’s operational expertise and entrepreneurial mind-set will ensure its successful integration into Lagardère Travel Retail and contribute to the achievement of our strategic objectives.”

The International Duty Free Terminal A Schengen store at Brussels International Airport.