Woolworths takes $552M bite out of PFD Foods

Grocery giant, Woolworths, is one of the first conglomerates to emerge from lockdown with a landmark transaction.

This week the second largest company in Australia bought into wholesale foods distribution specialist PFD Foods Services.

It's not yet known how the deal will change the make-up of the fleet of 750 multi-zone light commercial vehicles operated by PFD around the country after Woolworths announced it had taken a controlling interest in the company.

Woolworths anticipates taking on a 65 per cent equity interest in PFD for $302 million will provide fleet synergies through better route and capacity optimisation across the combined network of the two businesses.

In addition to this the supermarket group will pay $249 million for PFD's freehold properties which includes 26 distribution centres.

The acquisition extends a partnership between the two companies which in April, as part of its response to growing market demand, saw Woolworths announce its existing business customers could purchase product from PFD's range.

PFD Foods CEO Kerry Smith, whose family founded the business, said it would remain indepedent through the 35 per cent stake it will retain.

“We are pleased to deepen our existing strategic partnership with Woolworths Group for the longer-term via their investment in our business,” Smith said.

Subject to approval by Australian Competition and Consumer Commission (ACCC), the settlement of closing conditions is expected to be completed by the end of 2020 with Woolworths accessing funds through existing cash reserves and available debt channels.

Woolworths said the deal also includes an option after three years to acquire the remaining 35 per cent of PFD from the Smith family.

“We will help to support PFD's growth through access to our logistics, digital and data analytics and operational capabilities,” said Woolworths CEO Brad Banducci.

“We are excited by the opportunity to invest alongside the Smith family in PFD Food Services. It is a business we have long admired and we have a shared vision for continued innovation, customer focus and investment in the food sector.”

As the coronavirus pandemic wreaks havoc on the national economy it's the first major shake up in the commercial vehicle delivery segment since reports began that Japan Post was sounding out buyers for Toll.

PFD's longstanding alliance with Isuzu Australia was recently covered in July as part of a cover story exclusive to Prime Mover.

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