Quick exit for Quadrant in pet services
Nine months ago, the bidding process ended for City Farmers, Australia’s third-largest pet services business. Number two player Petbarn lost out to Quadrant Private Equity. A couple of months after that Petbarn joined forces with Greencross, the country’s leading veterinary services provider. Both Quadrant and Greencross placed their acquisitions in the context of the “humanization” of pets in Australia, tapping an industry now worth A$7 billion ($6.6 billion) and growing at 5% per year.
Last week, domestically-listed Greencross agreed to buy City Farmers for A$205 million, comprising A$155 million in cash and A$50 million in stock. Having paid A$93 million for an 87% stake in the business, Quadrant has already taken approximately A$130 million off the table.
As to why Greencross moved in for City Farmers so soon after Petbarn missed out on the business, Justin Ryan, a director at Quadrant, describes it as a defensive move.
"They came back because they wanted to buy it before we became too much of a threat," he says. "They have a minor presence in Western Australia where we have a strong presence. We were rolling out in the east and they could never have got coverage in Western Australia without buying our business."
City Farmers was founded in 1991 and bought by Clayton Hollingsworth, previously CFO of Australian internet services provider iiNet, six years ago. He was supported by several individual and family investors, and both they and he have now exited to Greencross.
Under Hollingsworth's guidance, City Farmers had grown from 10 outlets to its current 31 large-format stores by the time of Quadrant's acquisition. It has since added another 11 outlets, predominantly in eastern Australia, as per the PE firm's plan to build upon a dominant position in and around Perth and develop the business in Queensland and Victoria.
The purchase takes Greencross' Western Australia pet care retailing presence from five to 26 stores. Once the deal is completed, the company will have 285 locations across Australia and New Zealand, comprising 177 retail stores and 108 veterinary clinics, specialty and emergency centers, pathology labs and pet crematoria. City Farmers is expected to deliver revenue of approximately A$120 million and EBITDA of A$20 million for the 2015 financial year, including post-merger synergies.
City Farmers competes against a string of small-scale local operators and supermarket retailers that also sell pet food, supplies and related products. Ryan notes that the veterinary-plus-pet-services model is proven in other markets because it promotes customer stickiness. A comparable business in the UK, KKR-backed Pets At Home, listed earlier this year and has a market capitalization of GBP1.2 billion ($2 billion).
"We didn't expect a sale to happen so quickly," Ryan adds. "But we were the number three player and there was an opportunity to sell and take a stake in the number one player in what is a very attractive business."
More on Exits
Latest News
Asian GPs slow implementation of ESG policies - survey
Asia-based private equity firms are assigning more dedicated resources to environment, social, and governance (ESG) programmes, but policy changes have slowed in the past 12 months, in part due to concerns raised internally and by LPs, according to a...
Singapore fintech start-up LXA gets $10m seed round
New Enterprise Associates (NEA) has led a USD 10m seed round for Singapore’s LXA, a financial technology start-up launched by a former Asia senior executive at The Blackstone Group.
India's InCred announces $60m round, claims unicorn status
Indian non-bank lender InCred Financial Services said it has received INR 5bn (USD 60m) at a valuation of at least USD 1bn from unnamed investors including “a global private equity fund.”
Insight leads $50m round for Australia's Roller
Insight Partners has led a USD 50m round for Australia’s Roller, a venue management software provider specializing in family fun parks.