Metcash Limited · ASX:MTS
Metcash — Merger or Acquisition (February 2024)
65 slides from Metcash's merger presentation, Feb 5, 2024
Slide 1: Acquisition of Superior Food, Strategic Hardware Acquisitions and Equity Raising
INVESTOR PRESENTATION ACQUISITION OF SUPERIOR FOOD, STRATEGIC HARDWARE ACQUISITIONS AND EQUITY RAISING 5 F EBRUA RY 2024
Slide 2: Important Notices
Important Notices This investor presentation (Presentation) is dated 5 February 2024 and has been prepared by Metcash Limited (ACN 112 073 480) (Metcash). By attending an investor presentation or briefing, or accepting, accessing or reviewing this Presentation, you acknowledge and agree to the terms
Slide 3: Important Notices
Important Notices The share purchase plan booklet for the SPP will be available following its lodgement with the ASX. Any eligible shareholders located outside the United States (including eligible retail shareholders in Australia and New Zealand) who wish to participate in the SPP should consider t
Slide 4: Important Notices
Important Notices Future performance and forward-looking statements This Presentation contains certain “forward-looking statements”. The words “expect”, “anticipate”, “estimate”, “intend”, “believe”, “guidance”, “should”, “could”, “may”, “will”, “predict”, “plan” and other similar expressions are in
Slide 5: Important Notices
Important Notices Disclaimer The Placement is underwritten by the joint lead managers and underwriters (Joint Lead Managers). A summary of the key terms of the underwriting agreement between Metcash and the Joint Lead Managers is provided in Appendix D. To the maximum extent permitted by law, Metcas
Slide 6: Contents
CONTENTS 01 Transaction Summary 02 Overview of Superior Food 03 Rationale for Foodservice and Superior Food 04 Strategic Hardware acquisitions 05 Pillar Structure post strategic acquisitions 06 Combined Group and Financial Impact 07 Trading Update 08 Equity Raising Appendices 6 NOT FOR DISTRIBUTION
Slide 7: Highlights
Highlights 1 Three strategically aligned acquisitions announced today that deliver further diversification, resilience and provide Metcash with an even stronger growth trajectory ‒ Superior Food: Significant acquisition in foodservice market cements Metcash's position as the largest wholesaler and d
Slide 8: Executive summary
Executive summary •1 Metcash has entered into binding agreements for three strategic acquisitions: ‒ Superior Food, a leading Australian foodservice distribution business for an enterprise value (EV) of $390m to $412.3m1; ‒ Bianco, a construction & industrial supplies business servicing the SA and N
Slide 9: Transaction Summary
Transaction Summary 9 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 10: Transaction summary – acquisitions and equity raise
Transaction summary – acquisitions and equity raise 1 Acquisitions strengthen and diversify Food and Hardware pillars and accelerate Metcash’s strategic growth plans Metcash has entered into binding agreements for three strategic acquisitions (together, the “Acquisitions”) 1. Food: 100% interest in
Slide 11: Strategic fit of the acquisitions
Strategic fit of the acquisitions Fully aligned with our Purpose of championing successful independents in support of thriving local communities Metcash strategy Strategic impact of the Acquisitions Supply 03 Demand Provide a multi-channel B2B platform 02 Generate and capture for our customers Provi
Slide 12: Strategic fit of acquisitions (cont’d)
Strategic fit of acquisitions (cont’d) Metcash is a natural owner of Superior Food, Bianco and Alpine Truss, with the Acquisitions accelerating our Food & Hardware pillar strategies Food Liquor Hardware • A leading supplier of food to • Grow IBA share of independent IHG Total Tools independent busin
Slide 13: Strategic rationale for the acquisitions
Strategic rationale for the acquisitions Acquisition of a national foodservice distributor to step-change Metcash’s Bolt-on acquisitions of two trade businesses that enhance our network, foodservice distribution model, capabilities and reach, driving greater share of offering and proposition, and ac
Slide 14: Metcash Group financial snapshot after acquisitions
Metcash Group financial snapshot after acquisitions Further diversification of Group revenue and earnings Metcash Group before Acquisitions1,5 Metcash Group after Acquisitions2,3,5 co ian ss .l B Tru c e n Food pi 3% 6% F & G in 4% oo Al 14% IH 15% Food Food – Existing di ncl Food 1% Liquor Food – S
Slide 15: Metcash Food financial snapshot after Superior Food acquisition
Metcash Food financial snapshot after Superior Food acquisition Further diversification of Food revenue and earnings Metcash Food before Superior Food1 Metcash Food after Superior Food2,3 11% 12% Pro forma Metcash Food Supermarkets 9% Supermarkets sales contribution Supermarkets Convenience (Pro for
Slide 16: Overview of Superior Food
Overview of Superior Food 16 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 17: Superior Food
Superior Food Business overview Strategic rationale Transaction highlights Key financials (FY24E)1 • A leading Australian foodservice • Natural extension of Metcash’s • Total consideration of up to Sales $1.3bn distribution business Food strategy $412.3m, comprises an upfront EV ‒ Servicing ~20,000
Slide 18: Superior Food’s five business segments
Superior Food’s five business segments Segment Overview Sales and Gross Profit split Corporate • Large corporate and government customers FY23A (June y/e) sales split by segment (%)2 foodservice • Typically contracted (Corporate FS) Corporate FS 27% 31% Foodservice FS – Corporate Independent Street
Slide 19: Broad supplier base and a large and diverse set of customers
Broad supplier base and a large and diverse set of customers To a diverse set of With strong Large network of 600 suppliers… Supplying ~15,000 SKUs… segments and >20,000 customer loyalty customers… FY23A Foodservice procurement FY23A breakdown of FY23A sales Foodservice annual churn rate spend break
Slide 20: Superior Food financial performance
Superior Food financial performance Track record of strong financial performance including top line growth Consistent track record of sales growth since Focus on higher margin foodservice opportunities Margins are accretive to existing founding driven by organic growth + acquisitions driving stable
Slide 21: Superior Food financial performance – cash flow
Superior Food financial performance – cash flow Superior Food is a cash generative business with consistently strong and stable cash flow conversion Superior Food’s disciplined focus on net working capital has Historical maintenance capex of $6-7m p.a., resulted in strong operating cash flow convers
Slide 22: Rationale for Foodservice and Superior Food
Rationale for Foodservice and Superior Food 22 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 23: Acquisition rationale
Acquisition rationale Enhances Metcash’s core wholesale & distribution capabilities. Significant acquisition in 1 A natural extension of Metcash’s Food strategy foodservice market cements Metcash’s position as the largest wholesaler and distributor of food to independent businesses in Australia Intr
Slide 24: New capabilities and efficiencies unlocked
New capabilities and efficiencies unlocked Superior Food will benefit from and enhance Metcash’s core Food wholesale and distribution capabilities, enabling a natural extension of Metcash’s Food strategy Metcash Food value chain Sourcing Range expansion ✓ • Expanded ranging including fresh food and
Slide 25: Strengthens Metcash’s core Food business
Strengthens Metcash’s core Food business Superior Food enhances the value proposition for all of Metcash Food’s retailers, suppliers and customers Our Retail Network Our Supplier Network Our Customers ✓ More Fresh, More Often | High velocity ✓ Expanded Route-To-Market | Combined ✓ Increased Customer
Slide 26: An attractive growth channel for Metcash
An attractive growth channel for Metcash Foodservice market is large and growing underpinned by attractive structural long-term consumer trends towards convenience and out-of-home dining, and serves a diverse range of customer segments Foodservice is a ~$21bn market expected to grow at ~5% p.a. Serv
Slide 27: A leading national platform
A leading national platform Superior Food is one of the three largest national players in the Australian Foodservice market National platform1 One of three largest players Strong national platform 23 branches across Australia, providing >95% coverage of Highly fragmented market with more than 600 pl
Slide 28: Strong growth potential and significant white space opportunity
Strong growth potential and significant white space opportunity Superior Food is well positioned to continue its strong growth trajectory both organically and via acquisitions Large addressable market with significant white space Track record of network growth and significant pipeline Superior Food
Slide 29: Compelling combination benefits and synergy potential
Compelling combination benefits and synergy potential Expect to continue Metcash’s proven track record of extracting synergies and successfully integrating earnings accretive acquisitions – annualised (run-rate) synergies of ~$14m expected at the end of Year 2 post completion Expected annualised Com
Slide 30: Strategic Hardware acquisitions
Strategic Hardware acquisitions 30 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 31: Acquisition rationale
Acquisition rationale Expanding Frame & Truss (F&T) operations into Victoria and in South Australia / Northern Territory 1 Supports IHG’s ‘Whole of House’ growth strategy adding a large trade operation with a strong focus on foundation stage of a house Increases market share in the attractive trade
Slide 32: Bianco Construction Supplies
Bianco Construction Supplies Business overview Strategic rationale Transaction highlights Key financials (pro forma Oct-23 LTM)1 • Servicing the South Australian • Supports IHG ‘Whole of House’ • EV of $82.2m2 implies: Sales and Northern Territory Trade market for >40 years growth strategy • Broaden
Slide 33: Alpine Truss
Alpine Truss Business overview Strategic rationale Transaction highlights Key financials (pro forma Oct-23 LTM)1 • One of Australia’s largest Frame & • Frame & Truss is a key element of • EV of $64.0m2, which implies: Sales Truss operations, operating since 2002 ‘Whole of House’ growth strategy ₋ En
Slide 34: Expanded IHG network
Expanded IHG network Bianco and Alpine Truss expand IHG’s network across Australia and provide access to new markets in Victoria and South Australia. Frame & Truss Network Network Post acquisition, a network of 24 Frame & Truss Sites * 12 Joint Venture / Company-owned * 12 Independents NT NT QLD 5 +
Slide 35: Pillar structure post strategic acquisitions
Pillar structure post strategic acquisitions 35 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 36: Metcash pillar structure post-strategic acquisitions
Metcash pillar structure post-strategic acquisitions Metcash Group CEO Doug Jones Metcash Food Superior Liquor Independent Total Tools Group Hardware Group2 CEO: Grant Ramage* CEO: Craig Phillips CEO: Kylie Wallbridge1* CEO: Annette Welsh* CEO: Richard Murray3* FOOD LIQUOR HARDWARE * Group Leadershi
Slide 37: Combined Group and Financial Impact
Combined Group and Financial Impact 37 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 38: The Acquisitions are financially compelling
The Acquisitions are financially compelling The Acquisitions are EPS accretive and are expected to deliver material combination benefits • The Acquisitions are mid-single digit EPS accretive1 including expected annualised synergies of $19.1m EPS accretion • Metcash expects there is potential further
Slide 39: Sources and uses
Sources and uses The Acquisitions will be funded with a combination of cash, debt and equity Acquisition and funding details Sources and uses • Total aggregate potential purchase price of the Acquisitions of $558.5m (“Total Acquisitions EV”), Sources1 $m comprising: Proceeds from Placement 300.0 1.
Slide 40: Pro forma Income Statement (Oct-23 LTM)
Pro forma Income Statement (Oct-23 LTM) Metcash Placement, Metcash Oct-23 LTM; $m Pre-Acquisition & Superior Food Bianco Alpine Truss Net Debt Pro forma Equity Raising1 Funding 2 Sales revenue (including charge-through sales) 18,190.7 1,271.3 120.3 46.0 - 19,628.0 Underlying EBITDA (Pre-AASB16) pre-
Slide 41: Leverage impact of acquisitions and equity raising
Leverage impact of acquisitions and equity raising Metcash expects pro forma DLR1 to be 1.16-1.19x6, which is within its target leverage range Oct-23 LTM pro forma DLR1 (Leverage profile) • Following the Acquisitions & Equity Raising, Metcash expects to have balance sheet capacity to fund additional
Slide 42: Trading Update
Trading Update NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 43: Trading update and outlook
Trading update and outlook1 Group Pillar sales – Nine months ended 28 January 2024 ● Total Group sales for the nine months ended 28 January 2024 increased 0.9% Food compared to the prior corresponding period, reflecting growth in the Liquor and ● Total Food sales ex-tobacco increased 5.1%, and are f
Slide 44: Equity Raising
Equity Raising 44 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 45: Institutional placement and share purchase plan
Institutional placement and share purchase plan • Fully underwritten institutional placement to eligible institutional investors to raise approximately $300m Equity Raising size, • Issue of approximately 89.6 million New Shares under the Placement, representing approximately 9.1% of Metcash’s ordina
Slide 46: Placement and SPP timetable
Placement and SPP timetable Milestone Date1 Record date for participation in the SPP 7:00pm (AEDT), Friday 2 February 2024 Voluntary suspension and announcement of Acquisitions, Placement and SPP Monday 5 February 2024 Placement bookbuild Monday 5 February 2024 Announcement of outcome of Placement T
Slide 47: Appendices
APPENDICES A. Acquisition & Purchase Price Details B. Accretion Details C. Key Risks D. Summary of Underwriting Agreement E. Foreign Selling Restrictions NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 48: A. Acquisition & Purchase Price Details
A. Acquisition & Purchase Price Details Acquisition of a 100% interest in SFG Group Holdings Pty Ltd (“Superior Food”). The purchase price includes: 1. At the Enterprise Value (EV)1 level: ▪ A fixed upfront EV of $390.0m2, payable at completion ▪ Plus a potential incremental Group Earn-Out payment o
Slide 49: A. Acquisition & Purchase Price Details (cont’d)
A. Acquisition & Purchase Price Details (cont’d) Acquisition of 100% of the shares in Bianco Construction Supplies Pty Limited (“Bianco”) by way of the acquisition of 40%1 of the shares in Bianco and 100% of the shares in Bianco Hardware Pty Limited. The purchase price includes: 1. At the Enterprise
Slide 50: B. Metcash EPS Accretion Details
B. Metcash EPS Accretion Details Using backward looking Oct-23 LTM Superior Food Bianco Construction Alpine Truss Total Supplies Pre-Synergies Slightly dilutive (~1%) Accretive Accretive Accretive Mid-single digit Post-Synergies Accretive Accretive Accretive accretive Using theoretical assumptions o
Slide 51: C. Key Risks
C. Key Risks This section includes details of the key risks attaching to an investment in shares in Metcash and key risks associated with the Acquisitions. These risks may affect the future operating and financial performance of Metcash and the value of Metcash shares. The key risks are not set out
Slide 52: C. Key Risks (cont’d)
C. Key Risks (cont’d) For example, the increasing cost of living pressures may result in cost conscious consumers reducing purchases made at independent retailers or substituting such goods with purchases made at other perceived lower price retailers. Separately, the cost of housing and housing cons
Slide 53: C. Key Risks (cont’d)
C. Key Risks (cont’d) Further, the businesses of Metcash are highly regulated in many markets in which they sell their products. These regulations govern many parts of Metcash’s operations, including the import, manufacturing, marketing, advertising, distribution and sales of its products. Examples
Slide 54: C. Key Risks (cont’d)
C. Key Risks (cont’d) 1.10 Technology and cyber security risks Metcash relies on a number of complex information technology systems to support its warehousing and distribution, supply chain, retail, customer service, marketing and finance operations. A severe disruption to the information technology
Slide 55: C. Key Risks (cont’d)
C. Key Risks (cont’d) Metcash cannot guarantee that its existing insurances (which are provided by third party insurance providers) will be available or offered in the future. An inability of Metcash to maintain such covers in the future could limit the ability of Metcash to conduct its business, wh
Slide 56: C. Key Risks (cont’d)
C. Key Risks (cont’d) Exposure to disputes or litigation with third parties such as regulators (for example, the ACCC and AUSTRAC), employees, business associates, customers and suppliers (including as to the terms of supply arrangements), the holders of rental guarantees granted by Metcash (includi
Slide 57: C. Key Risks (cont’d)
C. Key Risks (cont’d) 2.2 Reliance on information provided by the sellers Metcash has undertaken due diligence processes in respect of each Acquisition, which relied in part on the review of financial (including unaudited and other financial information), operational, sales (including forecast sales
Slide 58: C. Key Risks (cont’d)
C. Key Risks (cont’d) Any inability to recover amounts claimed could materially adversely affect Metcash's financial position and performance. Further, if Metcash were to take legal action to enforce a claim under the warranty and indemnity policy or against any of the sellers, there is a risk that
Slide 59: C. Key Risks (cont’d)
C. Key Risks (cont’d) 2.8 Acquisition accounting Metcash is required to undertake an assessment of the fair value of the tangible and intangible assets acquired as well as the actual and contingent liabilities of each of Superior Food, Alpine Truss and Bianco at the dates of the Acquisitions. Accoun
Slide 60: D. Summary of Underwriting Agreement
D. Summary of Underwriting Agreement Metcash has entered into an underwriting agreement with the Joint Lead Managers (Underwriting Agreement), pursuant to which the Joint Lead Managers are acting as joint lead managers, underwriters and bookrunners of the Placement. The Underwriting Agreement contai
Slide 61: D. Summary of Underwriting Agreement (cont’d)
D. Summary of Underwriting Agreement (cont’d) • prior to settlement of the Placement, the ASX/S&P 200 Index closes at the end of a trading day at a level 15% or more below its level at market close on the trading day immediately prior to the date of the Underwriting Agreement (Base Level), or on the
Slide 62: E. Foreign Selling Restrictions
E. Foreign Selling Restrictions This document does not constitute an offer of New Shares in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares may not be offered or sold, in any country outside Australia except to the
Slide 63: E. Foreign Selling Restrictions (cont’d)
E. Foreign Selling Restrictions (cont’d) Norway This document has not been approved by, or registered with, any Norwegian securities regulator under the Norwegian Securities Trading Act of 29 June 2007 no. 75. Accordingly, this document shall not be deemed to constitute an offer to the public in Nor
Slide 64: E. Foreign Selling Restrictions (cont’d)
E. Foreign Selling Restrictions (cont’d) No marketing of the New Shares has been, or will be, made from within the UAE other than in compliance with the laws of the UAE and no subscription for any securities may be consummated within the UAE. This document may be distributed in the UAE only to “prof
Slide 65: February 2024
5 F EBRUA RY 2024