Hat World, a subsidiary of Indianapolis, In.-based Genesco Inc., has entered into an agreement to acquire one of its key competitors in the southeastern United States, Hat Shack, Inc. Hat Shack, based out of Marietta, Ga. currently operates 49 retail headwear stores located in 10 states. The purchase price for Hat Shack is $18 million, subject to adjustment based on net asset levels at closing. Hat World plans to fund the acquisition with cash on hand and with available borrowing capacity, if needed. The company expects to close the acquisition in the fourth quarter of fiscal 2007 or first quarter of fiscal 2008.
Genesco said it expects the acquisition to have a slightly positive effect on the company's earnings for the fiscal year ending February 2, 2008. In the third quarter, Genescos Hat World division posted a 13.4% increase in net revenues to $77.5 million, with a pre-tax profit of $7.7 million. At the end of the quarter Hat World operated 718 stores, with a plan to open 101 new stores before the end of this fiscal year. Adding the Hat Shack stores to the mix before year-end would bring the retail chain to a total of 868 stores.