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Italy’s Autogrill to Acquire World Duty Free

Autogrill has indulged in some duty free shopping.

LONDON — Autogrill has indulged in some duty free shopping. The Italian restaurant and retail company announced Monday it has agreed to acquire the World Duty Free Europe travel-retail operator and will increase its holding in Aldeasa, which operates stores in airports and museums, by 49.95 percent, giving it a 99.9 percent stake in that firm.

Autogrill claims the acquisitions will make it the world’s largest travel-retail operator.

WDF is the retail division of the British Airport Authority, which was acquired by a consortium led by Spanish construction and transport services firm Ferrovial in 2006. Autogrill will buy the Aldeasa stake from Altadis.

Autogrill stated that the combined enterprise value of the acquisitions weighs in at 1.07 billion euros, or $1.64 billion at current exchange.

“Through these transactions, Autogrill becomes the world’s leading provider in the fast-growing airport retail market,” stated Gianmario Tondato da Ruos, Autogrill’s chief executive officer. “WDF’s strong platform in one of the world’s leading airports and its retail operational excellence will allow the group to enhance its development plans and to create new value for our shareholders. At the same time, I am extremely pleased to continue to strengthen our collaboration with colleagues at Aldeasa.”

Autogrill will purchase WDF, which reported 2007 net revenues of 420.5 million pounds, or $841.8 million at average exchange, for 715 million euros, or $1.1 billion at current exchange.

WDF, which has entered a new 12-year concession agreement with BAA, manages 58 stores in seven U.K. airports, including Heathrow, Europe’s largest airport. Travel retailing has a strong tradition in the U.K., where average traffic growth has increased 5.4 percent annually between 2001 and 2006, according to Autogrill, which cited figures from U.K. Civil Aviation Authorities.

Autogrill will pay 275 million euros, or $422.1 million, for its fresh stake in Aldeasa, which posted revenues of 830.2 million euros, or $1.14 billion at average exchange, last year.

Tondato da Ruos said during a conference call Monday that, following the acquisitions, Autogrill will serve 500 million customers through its retail and food and beverage outlets in European airports annually.

“By creating the European leader, we will be able to have a new commercial approach — following customers from the origin to their destination, and developing European coordinating promotional activities, European coordinated assortments, European aligned concepts [and] loyalty schemes,” he said.

This story first appeared in the March 11, 2008 issue of WWD.  Subscribe Today.

He noted that large airports such as Heathrow also will offer insights into the needs of non-European travelers, while the company’s platform as a retailer and food and beverage service provider will offer competitive advantages in emerging markets.

The travel-retail industry remains incredibly resilient. Over the past decade, it has time and again bounced back from numerous world events that negatively impacted passenger traffic, including SARS, bird flu and the Sept. 11 terrorist attacks. Travel-retail also has risen to the challenges brought on by the resulting increased airport security, including limitations on the amount of liquid-based products passengers can carry on to planes.

The global travel-retail and duty free market is estimated at $29 billion, according to figures from Generation Group tracking firm, provided by Autogrill. Of that figure, 55 percent, or $16 billion, is generated in airports. Cosmetics, fragrances and, increasingly, luxury goods, sell particularly well in such environments, since vacationing travelers are often in the shopping mood, while time-poor and cash-rich business passengers are on the lookout for price advantages offered on high-ticket items.

Since travelers are encouraged to arrive at airports hours in advance of their flights to facilitate increased security measures put in place following international terrorist incidents, airport stores also offer distraction for passengers with time to kill. Following the abolition of intra-European duty free in 1999, many airport store operators, rebranded “travel retailers,” have focused more on offering high-service shopping experiences than on a cut-price product offering, which was duty free’s original selling point.

Heathrow airport, for example, will unveil Terminal 5 later this month. It is billed to be a shopping extravaganza, featuring 40,000 square feet of beauty retail space within a total shopping area of 200,000 square feet.

“[The acquisition] will allow World Duty Free to grow and prosper,” stated Mark Riches, managing director of WDF.

The integration of WDF and Aldeasa, along with airport services company Alpha Airports, which Autogrill acquired last year, will net synergies of about 40 million euros, or $61.4 million, annually by 2011, according to Autogrill. Autogrill stated that the most recent transactions will be earnings-neutral this year and accretive starting in 2009.

“In 1995, Autogrill was an Italian food and beverage motorway company with sales of approximately 800 million euros [or $1.23 billion],” stated Gilberto Benetton, chairman of Autogrill. “Today, our group is the global service provider for travelers with a presence in 42 countries and sales of approximately 6 billion euros [or $9.2 billion].”

Autogrill, which is listed on the Milan stock exchange, is controlled by Edizione Holding SpA, the Benetton family’s financial arm.

Both the WDF and Aldeasa deals are subject to European Competition Commission clearance.

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