Dufry to Raise $812 Million in Rights Offer for Nuance Deal

Dufry AG (DUFN), the Swiss duty-free store operator buying Nuance Group to create the world’s largest travel retailer, said it intends to raise about 725 million Swiss francs ($812 million) in a rights offering to fund the acquisition.

Shareholders will have the right to buy three new shares for every 17 they hold, the Basel, Switzerland-based company said in a statement today. The retailer said it plans to issue as many as 5.45 million new shares.

Dufry said June 4 it agreed to buy Nuance for about $1.7 billion, its biggest-ever purchase. The company raised 275 million francs earlier this month through the issuance of notes that will be converted into equity in 2015. It will also use at least 550 million francs in bond debt to pay for the deal. The currency for the bond issuance hasn’t yet been determined.

Dufry’s acquisition comes as global spending by travelers is set to increase as more middle-class consumers in China go abroad and wealthy Chinese splurge overseas amid a crackdown on lavish spending at home, Exane BNP Paribas said last month. Almost 40 percent of luxury spending is made by tourists, and Chinese consumers account for almost 30 percent of the total spent abroad, according to Exane.

“In the short term, the capital increase of 725 million francs has to be digested as it adds 16 percent to the existing shares,” Rene Weber, an analyst at Bank Vontobel AG, wrote in a note to clients today. The deal offers “significant synergies” and gives Dufry a clear lead in the duty-free market, he said.

If the capital increase is approved in a shareholder vote today, investors will be able to exercise the rights from July 1 to July 7. Any shares not purchased by existing shareholders may be offered to other investors.

Dufry shares declined 0.5 percent to 156.20 francs at 10:20 a.m. in Zurich trading. The stock has gained 13 percent from this year’s low on Feb. 3.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net David Risser, Thomas Mulier

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