Corporate: School uniforms is an $800m market and there’s now a small cap in it
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If you’ve ever shopped for school uniforms there’s a good chance you went to 97-year-old LW Reid. Now, ASX small cap HGL (ASX:HNG) is snapping it up.
HGL is an investment company that owns several brands including Mountcastle. Mountcastle is Australia’s oldest hat-maker, and one of Australia’s oldest companies.
It began in 1835 and serves schools as well as military and fashion clients.
Even though its parent company only has a market cap of $21m according to Bloomberg, Mountcastle will pay $23m over the next 18 months for LW Reid.
LW Reid mainly serves primary public schools.
The company told shareholders the combined business will make revenues over $40m. HGL CEO Henrik Thorup told Stockhead the schoolwear market was growing.
“We believe that the schoolwear market generally, just uniforms, is a market that is worth at least $700-$800m – that’s just spending on average,” he said.
In this morning’s announcement Mountcastle CEO James Baldwin also expressed optimism about the sector.
“It’s a fantastic time for the school uniform industry as sustained population growth continues to drive demand,” he said.
“The combination of two industry leaders will capitalise on an expanding sector through a full-service vertically integrated operating model.”
HGL shares climbed 8 per cent this morning after stagnating for the past several months.
Among its other business units are health product maker Pegasus Healthcare and lighting supplier JSB Lighting.
Tap Oil (ASX:TAP) jumped over 20 per cent after announcing it was paying its maiden dividend of 2.5c per share. The company will pay right on New Years Eve and noted its cash-at-hand balance and oil production from its field in the offshore Gulf of Thailand were among the deciding factors.