We expect the average profitability of Nuance’s concessions to converge with that of Dufry’s, through discontinuation of less profitable contracts and renegotiation of new concessions with predominantly variable fee structures. However, given Dufry’s historically high concession renewal rates of 80%, the curtailed concession lifetime does not materially diminish business visibility. We note an overall shorter concession lifetime and a higher share of concessions with maximum guaranteed payments will slightly elevate Dufry’s operating leverage. The acquisition will allow Dufry to expand and diversify its concession portfolio and add a number of profitable contracts. Given that over 80% of Dufry’s pipeline projects involve new concessions and expansions in these geographies, Fitch views the complementary geographic nature of the transaction as highly accretive to Dufry’s long-term business development goals. In the travel retail industry, Fitch views this as paramount for maintaining high quality of concessions and deriving an increasing amount of operational efficiencies.ĭufry will benefit from Nuance’s complementary presence in the Mediterranean region, Asia and the US. The acquisition of Nuance materially increases Dufry’s market leadership and scope of operations.
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