Saturday, June 15, 2024

Woolworths Group to acquire 55% of Petspiration Group

Woolworths Group has entered into an agreement to acquire a 55% equity interest in Petspiration Group (‘Petspiration’), a leading Australian and New Zealand speciality pet food, accessories and services retailer for a cash consideration of $586 million.

Petspiration is the owner and operator of leading retail brand PETstock and has a
network of 276 stores, established e-commerce platforms such as, a
2.4 million member Petspiration loyalty program, and a strong own brand range
including brands such as Caribu and Glow.

Woolworths Group CEO Brad Banducci says: “Specialty pet is a large and growing
retail segment in which we have limited presence. We are delighted to be investing
alongside founders, Shane and David Young, in Petspiration, the number two player
in the segment. Specialty pet is a logical adjacency given the high penetration of pet
ownership across Australia and New Zealand. The partnership will allow us to meet
more of our customers’ pet family needs with a complementary range of specialty pet
products and services, strengthen the Everyday Rewards loyalty program and unlock
opportunities for material value creation across both businesses.

“We will work together to support Petspiration’s growth through access to our retail
capabilities in areas such as Digital and eCommerce, Supply Chain, Retail Media,
Format and Network Development, and Advanced Analytics. We are confident that
this investment will deliver a strong return on investment for Woolworths Group
shareholders,” Mr Banducci said.

Shane and David Young (and other existing shareholders) will retain a 45% equity
investment in the business and continue as CEO and Managing Director respectively,
running Petspiration as a stand-alone business within Woolworths Group, under a
separate board and governance structure. Within Woolworths Group, Von Ingram, the
newly appointed Managing Director of W Living, will assume responsibility for
bringing the partnership to life and unlocking the value creation opportunities across
the Group.

Mr Young says: “This is a unique opportunity to partner with Woolworths Group to
continue to grow and strengthen the business we founded in Ballarat just over 30
years ago. We will operate independently of Woolworths Group but will work closely
together through our common values to deliver on all the opportunities we have to
jointly create value for our pet families and supplier partners.”

Transaction details

Woolworths Group will invest $586 million for its 55% equity stake in Petspiration.
Assuming net debt (including leases) of approximately $670 million, this implies an
enterprise value of approximately $1.7 billion. On LTM Sep-221 EBITDA of $158 million,
this represents an 11.0x EV/ EBITDA multiple.

“Over the last five years, Petspiration has delivered strong sales growth both
organically and through regional acquisitions with LTM Sep-221 sales of $979 million.
“Sales growth rates in the specialty pet sector are expected to remain strong, with
some moderation post-Covid, as customers increasingly favour specialty pet retailers
for their pet family needs. Petspiration is well positioned to continue to grow strongly,
as the business builds out and consolidates its national footprint and brand.

The transaction is expected to achieve a mid-teens internal rate of return, with
identified value creation opportunities to support strong earnings growth.”
The purchase price will be funded from the proceeds realised from the recent sale of
a 5.5% interest in Endeavour Group by Woolworths Group.

The transaction remains subject to customary closing conditions including ACCC and
NZCC approvals with completion expected in mid-calendar 2023.


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