Australian retail group commits $586 million to acquire Petspiration – Pet Food Processing

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BELLA VISTA, NEW SOUTH WALES — Woolworths Group, an Australian retail group, entered an agreement on Dec. 15 to acquire a majority stake in Petspiration Group, an Australian and New Zealand specialty pet retailer, for $586 million. Woolworths will acquire 55% of the company.

Petspiration offers more than 7, 000 SKUs of premium pet food and accessories, as well as services through its various brands, which include: PETstock AU and NZ, Caribu, Glow™, Total Animal Supplies, diggiddydoggydaycare, Syd Hill & Sons, Billie’s Bowl™, Europa Saddlery, Ballarat Pet & Farm Vet, Lower Plenty Veterinary Clinic, Pet. co. nz, and Establo. The company has a network of 276 retail locations, 65 vet clinics, 162 grooming salons, e-commerce platforms, a combined loyalty program of 2. 4 million people, and more than 2 million active customers.

Petspiration’s origins began in 1991 as Ballarat Produce led by the Young family. In 2002, the family-owned and operated business became PETstock, and in 2021 brothers Shane and David Young founded PETstock’s parent company, Petspiration.

With nearly 70% of Australian households owning a pet, the partnership serves to complement Woolworths’ retail offerings and offers the company the potential to expand into new specialty pet segments. According to data shared by Woolworths, Australian pet parents spend 28% more on their companion animals compared to pet parents in the United States. The specialized pet market in the country is expected to continue to grow through 2026 with a 5. 6% CAGR.

According to Woolworths, Petspiration is the number two player in the $10 billion Australian specialty pet market.

“Specialty pet is a large and growing retail segment in which we have limited presence, ” said Brad Banducci, chief executive officer associated with Woolworths Group. “We are delighted to be investing alongside founders, Shane and David Young, in Petspiration, the particular No . 2 player in the segment. Specialty pet is a logical adjacency given the high penetration of pet ownership across Australia and New Zealand. The partnership will allow us to meet more of our customers’ pet family needs with a complementary range of niche pet products and services, strengthen typically the Everyday Rewards loyalty program and unlock opportunities for material value creation across both businesses.

“We will work together to support Petspiration’s growth through access to our retail capabilities inside areas such as digital and e-commerce, supply chain, retail media, format and network Development, and advanced analytics, ” Banducci added. “We are confident that this investment will deliver a strong return on investment for Woolworths’ shareholders. ”

Under the acquisition, Petspiration will operate as a stand-alone business within Woolworths, maintaining a separate board plus management structure. Alongside other shareholders, Shane and Jesse Young will retain 45% equity in Petspiration and will remain with the company as chief executive officer and managing director, respectively.

“This is an unique opportunity to partner with Woolworths to continue to grow and strengthen the business we founded in Ballarat just over 30 years ago, ” Shane Young stated. “We will operate independently of Woolworths but will work closely together through our own common values to deliver on all the opportunities we have to jointly create value for our pet families and supplier partners. ”

Von Ingram, who was recently appointed to managing director of W Living at Woolworths, will oversee the partnership between the two retail groups.

The acquisition represents an enterprise value of approximately $1. 7 billion. According to Petspiration, it has witnessed strong organic and acquisitional sales growth during the past five years. For the 12-month period ended September 2022, the business achieved $979 million in sales. For the 12-month time period ended June 2022, 74% of sales were driven by the business’ retail segment, 10% was led by e-commerce sales and 16% was drive by other sales. Petspiration expects these sales to continue to grow.

For Woolworths, the transaction is anticipated to help support an internal rate of return (IRR) in the mid-teens and deliver “strong” returns for its shareholders. The purchase will be funded by proceeds from the group’s recent sale of 5. 5% equity in its Endeavour Group.

The acquisition is expected to close in 2023.

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