Metcash hires Goldman Sachs to weigh Superior Food Services bid

The $900m grocery wholesaler Metcash has hired investment bank Goldman Sachs to consider buying Superior Food Services from Quadrant Private Equity.

Metcash is among trade buyers and private equity firms considering an acquisition of Superior Food Services in the second round of the competition.

How serious Metcash’s pursuit of the business is remains unclear, with suggestions it may just be looking over the operation before making a decision as to whether it is the right fit for the company.

Earlier, Metcash was not thought to have had an interest in the business, which is up for sale at a time that supply chain restraints and escalating costs are at the forefront of the minds of retailers. Yet that appears to have changed.

Its Independent Grocers Association (IGA) grocery chain – the fourth largest in Australia with about 7 per cent of the market – has faced strong competition from Woolworths, Coles and Aldi over the years and has prompted it to diversify.

Supermarket giant Coles has always been considered the most logical buyer for Superior Food Services, although it remains unclear whether it is in the final stages of the competition.

Woolworths two years ago purchased a 65 per cent stake in PFD Food Services for $552m, but the ACCC would probably take a dim view of it also buying Superior Food, the No.3 player in the market. PFD holds the No.2 position behind Bidvest.

Stanton Road Partners is working the sale of the Superior Food, thought to be worth several hundred million dollars. Quadrant merged Melbourne-based Superior Services and Sydney-based NFD Food Services in 2015, creating a larger national group to service customers across the hospitality, aged-care and health sectors.

Metcash has a food wholesaling business and stakes in IGA supermarkets as well as the IGA head company, and it is the top supplier to independently owned liquor retailers.

Other businesses that Metcash has bought in the past include interests in Total Tools, of which it now owns 85 per cent.

DataRoom understands that Metcash at various stages has also cast its eye over API’s pharmacy rival Sigma in an effort to capitalise on its wholesale distribution channels.

It is previously thought to have been interested in buying online liquor distribution, food distribution in the pub and hotel space and smaller grocers, along with hardware.

Metcash raised $300m at the start of the pandemic as shoppers flocked to its IGA stores to stock up on supplies, sending its share price soaring. At the start of 2020, its market value sailed over $3bn and shoppers in the months after continued to favour their local IGA stores over larger, crowded grocers due to Covid-19 fears.

Metcash told the market in December it posted a 3 per cent lift in net profit to $128.8m for the six months to October as revenue grew 1.3 per cent to $7.2bn.


Extracted from The Australian

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