City Farmers sale to Greencross fetches $205 million
Tuesday, June 17, 2014/
Australia’s largest pet care company Greencross is set to rapidly expand its store footprint, announcing on Monday plans to acquire Western Australian-based pet care retailer City Farmers for a cool $205 million.
Greencross, which operates the Greencross Vets network of veterinary practices as well as the Petbarn and Animates pet care retail stores, said in a statement to the Australian Stock Exchange it will acquire 100% of the City Farmers business from Quadrant Private Equity and other shareholders, in a deal expected to be completed by July 17.
The company will fund the takeover by issuing new shares to the former owners, as well as Greencross shareholders and other investors.
The acquisition comes just months after the announcement of the merger of Greencross Vets and Petbarn, which Greencross acquired from Mammoth Pet Holdings in a deal worth an estimated $338 million.
Following the acquisition, Greencross will operate 285 locations across Australia and New Zealand, including 177 retail outlets and 108 veterinary clinics.
SmartCompany understands the City Farmers brand will continue following the acquisition and existing staff will stay on.
Greencross CEO Jeff David told SmartCompany the acquisition will “strengthen Greencross’ existing presence and further build our national footprint”, especially in Western Australia, which is home to 21 City Farmers stores.
David said the acquisition will also bring significant rewards for the company’s shareholders, with the Greencross updated its earnings per share guidance to 36 cents per share, compared to 31.5 cents per share prior to the acquisition.
“The acquisition of City Farmers is expected to deliver approximately $120 million to our revenues in the 2015 financial year and make a healthy positive contribution to our earnings per share,” says David.
According to the Animal Health Alliance report Pet Ownership in Australia 2013, the Australian pet industry is worth an estimated $8 billion a year.
However, David says the pet retail industry is “highly fragmented” among many players.
“With this acquisition, Greencross’ share of the Australian pet retail market foes from around 5% to around 7.5%,” says David. “So there is lots of opportunity for us to continue growing.”
Overall, David says the prospects for the industry are bright.
“The pet care industry has an attractive growth outlook,” he says. “Pet owners are more aware of the importance of pet nutrition, supporting a trend towards premium and specialty food brands.” “Two thirds of Australian households own a pet and two thirds of them regard their pets as members of the family,” says David.