Party City to divest Canadian business to Canadian Tire for $131m

Canadian Tire Corporation (CTC) has signed an agreement with Party City, a US-based retail chain of party stores, to purchase the latter’s Canadian business for C$174.4 million ($131 million).

The acquisition will help Canadian Tire become Canada’s leading party supply and celebration destination.

Party City with 65 Canadian retail stores in seven provinces is a one-stop shopping destination for party supplies and seasonal and micro-seasonal celebrations.

Apart from gaining a customer segment with millennials and Canadian families, Canadian Tire will acquire Party City’s brand, store network, and employee base, leaseholds and fixed assets in Canada.

The C$174.4 million, including approximately C$40 million in inventory deal is expected to create a new platform for growth and strengthen the Canadian retail company as “Canada’s Fun Store”.

The transaction is expected to help Canadian Tire more than double its estimated EBITDA attributable to its acquisition of Party City’s business in Canada, yielding an implied EBITDA multiple in the mid to low single digits by 2021.

Party City to sell it Canadian business to Canadian Tire. Photo courtesy of Social Woodlands from USA/Wikipedia.org.

The Canadian retail company will make Party City’s product assortments available nationally across 500 Canadian Tire Retail stores and online at Canadiantire.ca. The transaction will also expand Party City’s standalone store network in Canada.

Party City brand is added to Canadian Tire’s Triangle Rewards to further expand and strengthen the program.

The Canadian retail company will provide access to Party City’s catalog, including designs and licensed products such as Disney.

Allan MacDonald – Canadian Tire Retail EVP said: “Strengthening our marketplace is at the heart of our growth strategy and we are excited to welcome Party City into the Canadian Tire family of companies.

“We believe the Party City-Canadian Tire partnership will drive more trips, improve our offers in micro seasons, strengthen our connection with millennials and Canadian families and expand the appeal of Triangle Rewards.

“With our extensive CTR store network, unparalleled retail capabilities and Party City’s unique assortment, we are well-positioned to more than double Party City Canada’s business by 2021.”

Through its retail capabilities and extensive store network, Canadian Tire is aiming to double Party City’s Canadian retail sales to C$280 million by 2021.

Jim Harrison – Party City CEO said: “CTR has an unbeatable store network, retailing capabilities and customer loyalty.

“These assets, combined with our wholesale supply agreement, positions them well to grow the Party City brand in Canada.”

Subject to the usual closing conditions, the acquisition is expected to close in Q3 2019.