After a year-long process, Woolworths has received approval from the competition authority to acquire a majority stake in PETstock, a prominent player in the pet industry. The agreement, initially valued at $586 million, has been revised to $438 million for a 55% share in Petspiration Group, operating as PETstock, totalling an enterprise value of approximately $1.46 billion.
This strategic move by Woolworths, motivated by the surge in pet ownership during the COVID-19 pandemic, aims to capitalise on the lucrative $10 billion specialty pet sector. The acquisition’s finalisation encountered delays due to extended scrutiny by the Australian Competition and Consumer Commission (ACCC), which necessitated PETstock to divest certain assets.
The ACCC has now consented to the acquisition, contingent upon Woolworths fulfilling a legal commitment to support PETstock’s divestitures. The commission’s chair, Gina Cass-Gottlieb, highlighted the need for stronger legislation to proactively address competition concerns in mergers, emphasising the inefficiency of retroactive measures.
Woolworths’ investment in PETstock will be managed by a joint board, including representatives from the founding Young family and new chairman Colin Storrie. PETstock has demonstrated robust growth, reporting a 10% increase in sales to $892 million and stable earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $125 million.
Woolworths CEO Brad Banducci anticipates this investment will fulfil more customer needs and yield significant shareholder returns. PETstock, ranking second in the sector after TPG Capital’s Greencross, will divest 41 pet retail stores, 25 veterinary hospitals, several brands, and online stores to mitigate ACCC’s competition concerns.
The ACCC has raised alarms over PETstock’s previous acquisitions, which it believes might have breached competition laws, underscoring the limitations of Australia’s current voluntary merger notification system. The next major merger under ACCC’s scrutiny involves Sigma Healthcare and Chemist Warehouse, potentially forming an $8.8 billion entity.
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