The Reject Shop's (ASX:TRS) strategy is working well and its acquisition by Dollarama is expected to be complementary, given its plans to expand internationally and become a leading value retailer, Jarden Research said in a note on Thursday.
The Reject Shop and Canada-based retail chain Dollarama entered into a binding transaction implementation deed for the latter to acquire shares in the company through a scheme of arrangement for AU$6.68 per share in cash.
Dollarama is expected to be able to bring to The Reject Shop best-in-class merchandising, sourcing, logistics, and operational expertise. Dollarama has identified an opportunity to expand The Reject Shop's current network to 700 stores by 2034 from 390 currently.
Jarden downgraded its rating on The Reject Shop from overweight to neutral on reduced valuation upside. It also raised its 12-month price target for the firm to AU$6.68, from AU$5.10, noting that its share price is likely to be driven more by news around corporate activity than by fundamental valuation.
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