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February, 2024

Metcash to acquire three businesses in strategic expansion plan

Metcash has announced its plans to acquire three businesses: Superior Food, Bianco Construction Supplies, and Alpine Truss. This move is expected to bolster Metcash’s growth strategy, diversify its portfolio, and provide the company with a stronger growth trajectory.

Superior Food, a leading Australian foodservice distribution business, has an enterprise value (EV) of up to $412.3m. The company has achieved significant growth and evolved into a national foodservice provider of scale. Under the terms of the deal, Superior Food will continue to be led by founder and current CEO, Craig Phillips, and will operate within the Metcash Food pillar.

“Superior Food has achieved significant growth, evolving into a national foodservice provider of scale with the loyal support of our staff, customers and suppliers. Metcash’s capabilities and focus on supporting independents uniquely places them to continue our growth. We are proud of our past and excited about the bright future with Metcash,” said Craig Phillips, Superior Food founder and CEO.

Bianco Construction Supplies, a construction and industrial supplies business servicing the South Australia and Northern Territory trade market, has an EV of $82.2m. Alpine Truss, one of the largest Frame & Truss operators in Australia, has an EV of $64m.

“The acquisition of the Bianco Construction Supplies and Alpine Truss businesses are both strategically and financially attractive and follow our successful track record of consolidation in the fragmented Hardware market,” said Doug Jones, Metcash Group CEO.

These acquisitions are expected to bring annualised synergies of approximately $19m. They are expected to be mid-single digit EPS accretive on a pro-forma Oct-23 LTM basis including synergies, and EPS accretive excluding synergies. The acquisitions are also expected to be accretive to Metcash’s margins.

“We are delighted to announce three strategically aligned, synergistic and financially compelling acquisitions that accelerate our growth strategy. The acquisitions unlock substantial shareholder value and build on our track record of disciplined and accretive capital allocation. They also deliver further diversification and resilience to the Group and provide Metcash with an even stronger growth trajectory,” said Jones.

“The acquisitions provide a range of benefits for both Metcash and our network customers, which will allow us to continue Championing Successful Independents in support of thriving local communities, which is at the heart of everything we do.”

The acquisitions will be funded via a fully underwritten institutional Placement of $300m, existing cash and available debt facilities. A non-underwritten Share Purchase Plan of up to $25m is made available for eligible shareholders.

The acquisitions are expected to be completed in 4Q FY24 for Bianco and Alpine Truss, and 1Q FY25 for Superior Food. The Bianco and Superior Food acquisitions are subject to ACCC clearance.

News of the acquisitions came as Metcash released a trading update and outlook, noting group sales for the nine months ro 28 January 2024 increased by 0/9% compared to the prior corresponding period. The ASX-listed group noted liquor and hardware pillars as experiencing growth, including a 1.4% increase in total liquor sales in the third quarter, while food remained flat.

In the Hardware pillar, total sales increased 2.6% with IHG sales down 0.5% and Total Tools sales up 17.5%. In IHG, total network retail sales increased 0.6% (LfL: -1.5%), and in Total Tools, total network retail sales14 increased 2.8%, but were down -2.6% on like-for-like sales.

Total Group sales in the third quarter of FY24 were 0.4% lower driven by moderating inflation and a shift in the Christmas /New Year holiday period with builders breaking earlier and returning later than in the prior corresponding period.