First of all, welcome. I'm very happy to welcome you all to this presentation. I think that in addition to the obvious operational synergies and benefits of this partnership, I also think that we'd like to highlight initially the strategic value of creating a Nordic stronghold together with Pervesk Osbolager and our joint venture partner, TUKMANI. If you look at the 2 companies, Europe is, we have 255 stores now. It's increasing every week.
And then Oberscoa Spolaga have 94 stores. And together, we have then 349 stores at the moment with a combined sales of NOK 9,500,000,000. So a strong Norwegian Swedish player in the discount sector. And as mentioned previously, together with our joint venture partner, TUKMANI, we represent more than $17,000,000,000 in retail sales in the Nordic. And that's the reason why my comment about the Nordic stronghold.
I think that's a very important aspect of this partnership. In this sector, this is a sector that is growing quite strong in all countries. And with this partnership, we will be among the top 3 players in our sector in Northern Europe. So I think it also gives us an opportunity with the Nordic stronghold. It makes us as one of the big players in the European sector.
And I think that, that aspect is important and more important going forward than it has been historically. And as you know from before and we talked about it many times, we believe that this sector, this kind of variety retail sector, is a sector that has been growing more than the market, taking market share, not just in the Nordic but in Europe and the U. S. Over the last years. And we obviously believe that, that trend is set to continue.
The deal, as we have tried to explain in the package, is twofold. We take an initial 20% stake immediately, and we start working on achieving sourcing synergies immediately, very much the same as we have done together with TUKMANI historically. We have some initiatives that we're working on, and Briscoe Spallag obviously has some things they're working on. And then we have the potential to acquire the rest of the shares in 2020. And then we know each other more, and we have been able to achieve some of the synergies in 2020, and we can take the remaining 80% then.
Espen, I think you will take us through some of the highlights, and I'll come back later.
Yes. Looking at the transaction, as Tom Vida said in the beginning, it's a little bit unusual, but I think it suits both companies well-to-do this transaction in 2 steps, also allowing the sourcing partnership to start immediately. The first step is an acquisition of 20% by Aeropies in Rundespengruppen, which will be at the following terms. We will price the company on enterprise value using a fixed multiple of 7.7 on actual 2018 EBITDA of Rundsvengruppen. It's a share for share transaction and the transaction is estimated at €200,000,000 using today's share price and also the current exchange rate from NOK to SEK.
The transaction costs will be approximately $2,000,000 to 3,000,000 and occur in the Q2 of 2018. After the initial transaction, RuneScruggruppen or the family behind RuneScruggruppen will have an ownership stake of 4.5% in agroppes using the same calculation as for the purchase price. The option to require the remaining 80% in Rundgrensvengren will be exercisable in 2019 in 2020 based on the average EBITDA times 7.7 all 2019 and 20 18 2019 2020, right. The shares that will be issued to the sellers of Obe will be subject to a lockup until mid-twenty 21 if the option is exercised. The company is a household name in Sweden.
They operate discount variety retail stores across Sweden. It was founded in 1948 by Rune Sveinsson and is still owned by the family. The history, it's longer than Europriest, but has many of the same similarities. It started off as a wholesale company, has then grew into retail by several acquisitions. And Ove, Ove Schottesbolage was acquired in 1992.
Today, we operate 94 stores across Sweden. All stores are directly operated, and all are branded Oberskotsbolager. They are headquartered in Senninget, 2.5 hours south of Stockholm and has around 1800 employees. The company is 100% owned by the Svensson family in 2nd and third generation, and they have 7 owners in total. We have started the strategic turnaround where we already see positive results coming through.
Last year in 2017, they had a new management in place, and they have defined a clear strategy on how to improve profitability and also modernize stores and rebalancing the assortment in the stores. They have already implemented some measures. They have exited from unprofitable stores. They have repositioned the cost base, and that includes a 30% headcount reduction at the head office. These measures are expected to drive growth in revenues and EBITDA in 2018, and we already see positive results year to date May from these measures.
Paul? Yes. So the new management team or the management team at Oberschlosporager is a combination of people who have been there for some years and then new people. Fredrik Soderberg is obviously head of the team. He has an extensive experience at IKA and the pharmacy business, a long experience in the retail sector, together with Mikael, who has an experience from IKEA and Plantarsen, both in Sweden but also in Asia.
So a wealth of experience in the sourcing and the logistics area. Meta was previously working at IKEA and Rusta and was one of the masterminds behind the turnaround of Rusta some years ago. So that's a very interesting background and experience in the concept development, assortment development part. Kent is a seasoned executive and CFO who's been with the company for 3 years and Eeva, who has been in the HR function for 8 to 9 years now, and they represent the continuity in the management team. And of course, we have met and talked.
And one of the benefits of this is that we really share the same strategic agenda. We have the same perspectives on how to develop both Europis and the West Coast Polarge. And we see some obvious synergies I'll come back to in comparing notes between the 2 different formats that are quite equal in terms of concept. So we will start working on the joint sourcing immediately and share best practice experience. But the companies will obviously be run separately with 2 independent management teams, We own 20% initially, so that's obvious.
And we will get a board representation as soon as possible practically possible in each other's companies. But the sourcing will start immediately. And we will give you more details. You'll see it later in the package. But Bircospor Lag is very similar to Europritz, having a little bit more grocery than Europritz.
So in the sourcing area, we can obviously benefit from groceries broadly defined, having benefiting on their scale in this area. And the fact that price levels in Sweden are a little bit lower than in Norway. We have more purchasing from Far East and Obrasco's Polago obviously can benefit from sharing those volumes together with Hoekmannianas. So that's we work through all the many different categories to estimate the potential. So the potential is sort of bottom up, made of looking at some of the major products and categories and looking estimating a potential per category.
So it's a detailed analysis that have been made. These are the concepts. To the left, you have the Europe's version 5.1 and to the right, you have the Viscos Bel Age Version 2.0. Many, many similarities, but also, fortunately, some differences. And we believe that we can benefit a lot from comparing notes, not just on category development, concept development, seasonal development and campaign development.
We think that is in a broad range of areas. We have a benefit of working together and learning from each other's experience. But the formats are also very much similar. That's why this is a happy and good marriage. In the digital area, as you might have noticed, we are at in the moment of launching our digital eCRM solution.
We launched our e commerce operation a couple of weeks ago. OBE does not have that yet. But obviously, there are benefits of sharing cost, but not just cost, but actually also best practice experiences between the different countries. We think that in the future, there's an exciting potential in the digital area, but we think that we can obviously benefit from having 2 markets to learn from and sharing experiences across the market. Also on the automation, next year, we open our new central warehouse.
And in that area, there's a lot of things happening. And of course, any investment and experience in automation will also benefit both parties. And that will be more important in the future than it's been historically. So just to summarize sort of why does it make commercial sense. Obviously, there's some sourcing synergies.
They will start coming in late 2019. And based on our experience from the TUKMANI joint venture, we see that they will gradually come in over time. As important as the direct synergies is, of course, the fact that we are starting working together and we get a much broader base of products in our categories that we can look at. So I think this is an important action in order to make sure that we can get a supply of new products at very competitive prices in a market that is a little bit tougher competition than in Norway. Also on the concept, we think that there's the 2 concepts next to each other are very similar, and we can learn from comparing notes.
We are strong in certain categories. Oberscoesporager is strong in all the categories. And there's obvious benefit of looking at each other's experiences. We also think in sort of deals like this, it's important that we have the same kind of perspective on where we want to take the 2 companies and the concepts, and we do. We think that Fredrik and his team and us are very much aligned on the strategic agenda for the 2 formats.
They are doing what we would have done if we were there. And so we are very it's an experienced team and the same strategic agenda. I think that's important. There are some economies of scale, as I said, in the digital area, automation, artificial intelligence going into the future. And we think that, Tom Yudere alluded to, that it's a low risk way of starting on an international expansion that gives us access to new products, better prices with a limited financial exposure.
But I would like to highlight the fact that I think the strategic aspect of it, not just the direct synergies and the obvious kind of short term, medium term benefits, but I would like to highlight the strategic value of creating a Nordic player that is really we create a Nordic stronghold and a dominant player in the Nordic markets. And that's a very important aspect, in our opinion, on this deal. So with that, I think we will open up for questions if you have anyone. We have some further material in the package, but that obviously you can it's for the especially for the analysts to digest into. Yes, just a second.
You'll get a microphone.
Yes, thanks. Petter, ABG. Agriplies has acquired concrete strategy when it comes to store rollout in Norway. Thus, Ourskutsporage has a strategy of rolling out stores in Sweden?
I think that the I mean, only acquire now a 20% stake in Everskorf Lager. Historically, they as Espen said, they closed a couple of stores. They are in the process of testing a city format where they are and then they're going to conclude later on whether to roll that format out to the rest of Sweden. So that's a little bit into the future. And they also are in the process of looking at this version 2.0, which is a modernized kind of Verschkosbolager that they have tested out with good results.
And that is part of the strategic plan to roll that out to the remaining store portfolio. That's the key elements of it.
Perfect. Another question for me. Paul, you said that size is probably more important now versus historically. Can you elaborate a little bit regarding that and the timing of the deal?
Yes. I think that not just at the moment, but I think if you have a long term perspective on Europris like we have, I think that if we look in the long term perspective, I think discounts if you see it internationally, it's discount sector is growing. I think size matters in order to have the best prices. If you're in the discount sector, you need to have access to the best products at the best possible prices. And I think that in that respect, size matters.
And I think this deal enables us to have a Nordic stronghold where we can get the best possible prices for the Nordic consumers. So I think that's why it's important, more important in a long term perspective going forward than it has been historically.
Martin Stansz, Zaldanska. Maybe a few more comments on the comment you made about this is the start of an international expansion. And obviously, this is an exciting step, but it sounded like you might have views of expanding outside Sweden also. Would it be a thought to also join with TUKMANIO or maybe into Denmark over
time? I think that our key focus in the next few years is to make sure that this partnership is successful and take that and realize the synergies and the potential of this deal. We already have a very good partnership with Tocmani. So I think our focus in the short term, medium term will be to make this a very huge success.
And then a question on Oberskuts Bulagen. I believe there was a negative growth from 'sixteen to 'seventeen. And I assume that's partly due to store closures. But do you have the like for like figure for Oskos Bolago over the past few years?
The like for like performance has been negative historically for a couple of years, but turned into the blacks last year and they show positive development this year. So we believe that the measures they're taking is bringing in the right direction. And we are sure that they will manage to make this turnaround work.
And then maybe comment
on the estimated or budgeted EBITDA for Oskars Polag of 164. It seems like a rather big jump from 2017. And I understand that we could there's already year to date an improvement, but what could actually make up for the remaining part?
That is basically what we said. They take out some unprofitable stores historically. They made the head staff the reduction at the head office and that also included some one off costs. So we believe that going forward, they will have a new cost base and they also get rid of the unprofitable stores. So it's that's what's going to drive the improvements from 2017 to 2018 and they are on the way.
Okay. And then about the sourcing synergy potential. You have had the joint venture with Tucumane for some time. And as I understand, there's been some positive synergies out of that. And you have done this bottom up estimate of what you can make with Is it maybe in the mid range of what you think you can achieve relating to what you maybe have achieved with TUKMANI so far?
I think it's our best guess of what we can achieve based on our experience with TUKMANI. Obviously, the guys that have estimated this is the same guys that have estimated and implemented the synergies with TUKMANI. So I think there but as I said, the one thing is the medium term I would call it medium term synergies. As important is the fact that we are creating a bigger base. And going into the future, we can actually also get access to even better prices and better products in sort of long term.
I'm as excited about that as I am about the direct synergies. Okay. Thank you.
How does your gross margin compare with the Oerfjords Pulau, it's historically?
The gross margin on Europrices is higher. That is basically due to the product mix, which is in the Odfjektus Polagen more directed towards groceries than with Europrize. So the mix effect also impacts the margins.
But how much do you have a figure for
It's in the range, 7% to 8% points.
Okay. And could you also comment on why you are paying with shares and not cash, your rationale?
That's the agreement we reached, and we believe that Svensson family, they have been in the retail business for many years. They are long term investors and still want to be in the retail business and we believe that they can contribute as owners and they do as well.
And can you comment on whether there were any other potential buyers of interested parties in OCI Sporay?
So I guess that's enough for
us to comment on. I think we had
a long term dialogue with the Senso family, and we have the same agenda. And we have a it's a benefit from both parties and it's an obvious match and it's obviously a very good match for Erbdischlosporager, but it's also a good match for Europris. And I think that made the deal come through.
Yes. One follow-up question for me. What needs to happen
for you not to exercise your option in 2019,
2020 to buy the remaining 80%, what kind of, let's say, key risks and key opportunities we look for?
I think our key focus, Al, is for us to decide at that point in time. But I think our key focus now is to make this successful and make this happen. I mean, we're doing this, obviously, because we think that it's going to happen. And it's in a 2 stage process that is good for both parties. And I don't want to speculate on what could potentially happen for us to go away from the deal.
But I think we're going within and within our partners that we are going to make this deal successful. So I think we're going to we are going to make it in 2022.
Just one brief follow-up. Euskuzburg with 94 stores. And you mentioned that there's been some store closures that has been profitable. What about the development, let's say, over the past 5 years? And then the strategy going forward, could we expect Energous Sprague also to open new stores going forward in addition to close nonprofitable ones?
I think that as we mentioned before, I think they closed sort of profitable stores. So they have a sort of stable base there. And then they have a few more stores planned for this year. But I think as I said, they have tested out some city stores. Is like a new concept that we are also testing out or going to test out.
And that could lead to more stores. But as I said before, it's not a target in itself to open more stores. It's only if they are profitable and have a good business case. But I think that's something they are evaluating and testing at the moment. Very good.
Okay. Any questions from the web?
Yes. Karl Johan Molnes. How will Eberpis be involved with the restructuring and profit improvement of OBE? What is the hurdle margin OBE has to reach for Evbuplis to exercise the last 80% of the stocks?
I think we will as I said, we will take a board seat with the Oberschoscolager. That's I mean, and then we will also commence on a purchasing project, joint purchasing project for the benefit of both companies. And that's it. We haven't defined the hurdle rate for exercising the option. And so that's no comment on that.
Ole Martin Westgaard, DNB. If I understand you correctly, you expect to exploit synergies of NOK 40,000,000 to €80,000,000 primarily from sourcing. How should we think about the remaining synergy potential if you were to exercise the option for the remaining 80%?
Yes. 60% to 80% was the joint sort of sourcing synergies, roughly equally distributed between the companies. So that's the sort of medium term synergies. There are obviously more, but that's part of the process that we're going to work on in the next few years is to look at also other synergies and opportunities going forward.
And the last one, to cite Jain Goldman Sachs. Incremental cost of implementing this joint venture. Just to be clear, you intend to benefit in grocery purchase, which you can source incrementally more from Sweden and OBE benefits in general merchandising?
It's a very that's a very simplified version of it. Obviously, we have multiple different categories. We are all going to benefit. We are going to benefit from Far East sourcing and they're going to benefit from grocery purchases. But the main, if you look at the big figures, we have a little bit more skewed towards the groceries, not the food, but the grocery in total.
They have a little bit more skewed towards Far East products. But we are also going to benefit from Far East products and having joint volumes. So I think it's in all different categories. Okay. So thank you for coming, and we are available for follow-up questions later.