Steinhoff's proposed acquisition of Australian furniture retail group Fantastic Holdings for A$361-million (about R3.89-billion) will help give the group scale in that country, but equates to only about 1% of Steinhoff's market capitalisation. Announcing the deal on Friday, the integrated retailer said it would offer A$3.50 a share for Fantastic. If the deal is done, Steinhoff will use Fantastic's vertically integrated supply chain.Fantastic, which operates chains such as Fantastic Furniture, Plush, Le Cornu and Original Mattress Factory, has 126 stores in Australia.Victor Dima, an equity analyst at Dubai's Arqaam Capital, said Fantastic was relatively small, and would contribute only about 3% of group revenue and improve group earnings before interest and tax by less than 1%."But it will more than double [Steinhoff's] Australian operations. From that standpoint they are going to get scale, and they are going to get market share operations, which is not necessarily a bad thing," he said.story_article_left1Steinhoff has two furniture retailers in Australia: Snooze with 81 stores and Freedom with 62. Its annual report said its Australian operations had revenue of à304-million (R4.8-billion). Assuming this deal goes through, it is estimated that Australia will account for about 7.5% of group revenue.While the acquisition might be marginal in the greater portfolio, it was in line with Steinhoff's acquisition strategy seen in the past few months, said Dima.In August, Steinhoff acquired US-based Mattress Holdings for $3.8-billion (R54-billion), which SBG Securities analyst Eckhard Goedeke said was more significant than the Fantastic acquisition. This year, it also bought UK retailer Poundland and local shoe retailer Tekkie Town after buying Pepkor for almost R63-billion.Commenting on the proposed Fantastic deal, Goedeke said: "It's just so insignificant in the scheme of Steinhoff. For a à20-billion company, A$361-million is just so small it doesn't even get to a percent of the company."Bloomberg Intelligence said in a research report last month that sustaining organic profit growth was a challenge for the retailer. "It has raised à 2.4-billion in new capital to fund acquisitions, including the recent Fantastic Holdings bid."Supply chain capacity will help Steinhoff's household-goods margins, but growth depends on integrating Mattress Firm and gaining share in a fragmented category where e-tailing is rife, the report said.Steinhoff has been called "Africa's Ikea" for its aggressive acquisitive strategies, but Goedeke disagreed with this view, saying: "Ikea is a format that has grown organically whereas Steinhoff is grown by acquisition. You've got one brand for Ikea, and you've got a dozen for Steinhoff."Goedeke said the proposed Fantastic deal was just part of Steinhoff's strategy of expansion by acquisition.Steinhoff's share price on the JSE was up 2.32% at R74.51 by the close on Friday.The deal is expected to be completed by the end of December...