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SUPERMARKETS TO PROLONG COVID RESPONSE COOPERATION Supermarket operators have received the green light to continue cooperating to ensure supply of food and groceries in response to the Covid-19 pandemic, under an ACCC authorisation granted earlier this month. Coles, Woolworths, Metcash, ALDI and other grocery retailers whose participation is approved by the ACCC are allowed to coordinate with each other when working with manufacturers, suppliers, and transport and logistics providers. “We recognise the impacts that the pandemic continues to have across the economy, including within the food and grocery sector,” ACCC Commissioner Stephen Ridgeway said. “Allowing this authorisation to continue will likely result in public benefits by giving supermarket operators the opportunity to maximise consumer access to retail groceries, reduce community concerns and stockpiling behaviour, and reduce strain on retail supply chains.” The authorised conduct applies only to discussions and agreements made at meetings convened by government agencies. The ACCC has been attending these meetings to observe and monitor the use of the authorisation, and to assess whether it should continue. “The recent Victorian outbreak and stage four restrictions have highlighted the benefits of this authorisation in assisting retailers to maintain supply of grocery products, including to those customers in regional and remote areas,” Mr Ridgeway said. Authorisation is granted on similar terms to the interim authorisation and doesn’t extend to coordination about the prices of retail products. The ACCC is granting authorisation until 31 March 2021. NEWS WOOLWORTHS INVESTS IN PFD FOOD SERVICES Woolworths Group has agreed to extend its strategic partnership with PFD Food Services by acquiring a 65 per cent equity interest in the business. The group will also acquire 100 per cent of PFD’s freehold properties, which primarily comprise 26 distribution centres. “It’s a business we’ve long admired and we have a shared vision for continued innovation, customer focus and investment in the food sector,” Woolworths Group CEO Brad Banducci said of PFD and the partnership. “We look forward to delivering even better experiences together for our customers as we continue to respond to their changing needs in a post- Covid world. “This investment is a logical adjacency for Woolworths Group and further supports the evolution of the group into a food and everyday needs ecosystem. It will build on our existing partnership with PFD, the number two player in the large and fragmented out-of-home foodservice and non-retail business-to-business markets. “The investment will also unlock synergies for both businesses across the combined network and fleet. We’ll help to support PFD’s growth through access to our logistics, digital and data analytics and operational capabilities. For Woolworths Group, it will enhance store range localisation and provide fleet synergies through better route and capacity optimisation across our combined network.” PFD will operate independently under CEO Kerry Smith. A separate board and governance structure will be implemented, with her father, Rick Smith, the founder of PFD, continuing to be involved. Ms Smith says PFD is pleased to deepen its existing strategic partnership with Woolworths Group for the longer term via the investment into the business. “As a family owned and operated business which prides itself on its customer and supplier relationships, it’s important that PFD operates as a standalone business, run by the existing team,” she said. “In Woolworths Group, we’re confident we’ve found a partner with shared experience and expertise, but also whose operations and vision for the future complement our own.” The finer details Woolworths Group says it will initially invest $302 million in PFD to acquire a 65 per cent equity interest. The transaction, according to Woolworths, implies a multiple of 11 times pre-AASB 16 EBITDA of $57 million assuming net debt of $157 million. Woolworths Group will also acquire PFD’s freehold distribution centre properties for $249 million, which will be leased back to PFD. Like many other businesses, PFD’s current earnings have been impacted by Covid-19. Despite this, the investment is expected to be earnings per share accretive in the first full year of ownership and deliver a strong return on investment to Woolworths Group. The transaction is subject to an earn-out at the end of FY22 and FY23 if earnings growth materially exceeds the business plan. Put and call options have also been granted to the Smith family and Woolworths Group respectively over the Smith family’s remaining 35 per cent shareholding, exercisable from the third anniversary of completion. The transaction is subject to ACCC approval and the satisfaction of customary closing conditions, with completion expected by the end of 2020. The purchase price will be funded from existing cash reserves and available debt facilities and is not expected to affect the Woolworths Group’s existing credit metrics. SEP, 2020 RETAIL WORLD 5