Greencross takeover talks: Flags challenging conditions at AGM, pares back trading in update

PET and vet outfit Greencross heads into $600m-plus takeover talks while warning conditions for a key market is ‘challenging’. For 1 director, also a Shark Tank judge, a payout could be bittersweet.

Glen Richards of Greencross Vets. Picture: David Kelly

PET and veterinary services outfit Greencross is heading into $600 million-plus takeover talks this weekend while warning conditions for a key market is “challenging”.

Shares in the Brisbane-based outfit, whose directors include Shark Tank judge Glen Richards, were locked in a trading halt at $4.54 on Friday amid takeover talks.

Greencross also held its annual general meeting, with new chief executive officer Simon Hickey telling investors that “overall vet markets remain challenging”.

A trading update pared back some figures given in August.

Revenues at the company, which had included the Greencross Vet chain and Petbarn stores, had still risen 7.6 per cent by week 17 of trading. Like-for-like sales, which strips out the impact of store openings and closures, were up 5.4 per cent.

But cost-cutting measures flagged earlier this year were not expected to deliver any boost to raw earnings for the first half of the financial year, Mr Hickey said.

Greencross has had a tough year, with profits dropping and a change of CEO occurring.

It has led to more talks with private equity outfit TPG Capital. Nearly three years ago - in association with former Greencross CEO Jeff David – TPG had unsuccessfully made an offer for the animal business at substantially higher $6.65 a share.

Sources with knowledge of discussions said current negotiations are looking at more than $5 a share – an offer of almost $5.35 would be almost 30 per cent premium to where shares were trading before recent takeover talk re-emerged. That would value Greencross at $644 million.

Among the bittersweet beneficiaries of any takeover, given the lower offer this time, would include current and former top brass, and initial backers of Petbarn, which Greencross took out in 2013. Petbarn sells food and services such as puppy training.

Dr Richards’ stake in a takeover would be worth $12.6 million. Chairman Stuart James’s 2.5 million shares would be worth $13.37 million.

Other top 20 shareholders, but with significantly lower stakes, include former Greencross founding director John Odlum, also a graduate of University of Queensland’s vet school; and private companies linked to the company’s general counsel Vincent Pollaers.

Others in the top 20 included private companies linked to backers of Petbarn: Paul Wilson, Michael Hume and William Teasdale.

Mr David’s private company is also listed as owning 3.26 per cent of Greencross, which would be worth $20.9 million. He is understood to have been working with TPG in the US, where he is based.

Among issues up for discussion in negotiations are thought to include any impact of online seller Amazon, which launched a pet category in Australia recently. It’s a threat which in the US, has resulted in pet-goods retailer Petco recently saying it was trying new strategies to “Amazon-proof” its business, such as via service-focused options such as dog-walking.

* An earlier version of this story incorrectly calculated the value of Dr Richards’ stake.