Woolworths Group will acquire a 65 per cent stake in foodservice supplier PFD Food Services for $552 million, as well as 100 per cent of PFD’s freehold properties, including its 26 distribution centres.
The transaction will see a $302 million initial investment from Woolworths in PFD to acquire 65 per cent equity interest, while PFD’s distribution centre properties will be purchased for $249 million and leased back.
Woolworths Group CEO Brad Banducci said the deal will build on the existing partnership with PFD, which is currently the number two player in the large and fragmented out-of-home foodservice and non-retail business-to-business markets.
“This investment is a logical adjacency for Woolworths Group and further supports the evolution of the Group into a Food and Everyday Needs Ecosystem,” said Banducci.
“The investment will also unlock synergies for both businesses across the combined network and fleet. We will 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.”
As part of the deal, PFD will retain its senior leadership team and continue to operate as a standalone business, led by CEO Kerry Smith, who said he was pleased to deepen the existing partnership with the supermarket giant.
“As a family owned and operated business which prides itself on its customer and supplier relationships, it is important that PFD operates as a standalone business, run by the existing team,” said Smith.
“In Woolworths Group, we are confident we have found a partner with shared experience and expertise, but also whose operations and vision for the future complement our own.”
A separate board and governance structure will be implemented as well, with PFD founder Rick Smith also continuing his involvement in the business.
The transaction is subject to an earn-out at the end of FY22 and FY23 “if earnings growth materially exceeds the business plan”, Woolworths outlined.
The deal is subject to approval from the Australian Competition & Consumer Commission (ACCC), with completion expected by the end of 2020.
Last week, the company annouced it had appointed its own chief medical officer to help the company respond to COVID-19.
Woolworths Group will release its earnings report for FY2020 on 27 August.