Metcash to buy Superior Food in $559m distributor spending spree

Metcash to buy Superior Food in $559m distributor spending spree

The Australian foodservice distribution industry is set for its biggest shake-up since Woolworths Group took a majority stake in PFD Food Services, with Metcash (ASX: MTS) set to spend up to $412.3 million to buy Melbourne-headquartered Superior Food, which delivers to 20,000 customers nationwide including restaurants, fast-food chains, caterers, cafés and hotels.

Metcash, itself a wholesaler and distributor for brands such as IGA, Mitre 10 and Foodland, is also acquiring Adelaide-based Bianco Construction Supplies for $82.2 million and Wangaratta-based Alpine Truss for $64 million - two acquisitions that will form part of its Independent Hardware Group (IHG) division.

The spending spree will be funded by a fully underwritten institutional placement of $300 million, as well as $278 million from existing cash and available debt facilities.

Metcash will also be undertaking a share purchase plan (SPP) worth up to $25 million to boost the coffers at $3.35 per share, representing an 8 per cent discount to the last closing price.

As part of the deal for Superior Food, which entails a $390 million upfront payment and $22.3 million in potential earn-outs, founder and CEO Craig Phillips will stay on within Metcash's food division.

"Superior Food has achieved significant growth evolving into a national foodservice provider of scale with the loyal support of our staff, customers and suppliers," Phillips says.

"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."

Superior Food recorded $1.3 billion in revenue in the 12 months to 31 October 2023 with an underlying EBITDA of $43.8 million. The group is run from 23 branches across Australia with a total warehouse space of 80,000 square metres, managing a fleet of around 290 vehicles that make an estimated 670,000 drops annually.

"Superior Food provides a compelling opportunity to expand in an attractive and adjacent growth market through an industry-leading player with an established national platform for future growth," says Metcash Group CEO Doug Jones.

"The combination of the two businesses unlocks diversification benefits, procurement savings, range expansion and expands our purpose of championing successful independents.

"Food distribution to independents is a business we know well. This, together with our proven integration track record, provides confidence in our ability to unlock value through the immediate scale that this acquisition provides in such a high-growth and fragmented space."

Across all the planned acquisitions, Metcash forecasts annualised synergies of $19 million, and expects the deals will be accretive to its profit margins.

Bianco Construction Supplies is the leading independent building materials supplier in the South Australian market and also services the Northern Territory, with 10 sites in total servicing builders, concreters, bricklayers and landscapers; a business that generated $144 worth of sales in the 12 months to 31 October 2023, and underlying earnings of $13 million.

Alpine Truss is one of Australia's largest frame and truss operations and operates a large fabrication plant in Wangaratta, servicing small to large builders across Victoria and southern NSW. The business generated $46 million in sales in the 12 months to 31 October 2023, and underlying earnings of $10.5 million.

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