Greencross TPG deal worth $670m, founders worth millions including Glen Richards’ stake

UPDATED: Greencross directors have asked investors to back a takeover offer that is almost $100 million cheaper than a potential bid knocked back for the pet service almost three years ago.

TPG has offered $670m for Greencross.

• Greencross AGM: challenging times for vets

GREENCROSS directors have asked investors to back a takeover offer that is almost $100 million cheaper than a potential bid knocked back for the pet service almost three years ago.

The new $675 million bid from private equity outfit TPG received board backing from Brisbane-based Greencross, which oversees 160 veterinary clinics and 250 stores under brands including Petbarn and City Farmers, after weekend negotiations.

TPG is offering $5.55 a share. That is 34 per cent more than the $4.14 mark that shares had been trading in October, just before murmurs of a new buyout approach surfaced.

If investors back the deal through a scheme of arrangement, TPG will pay either in straight cash, or a mix of cash and shares in the private business taking over the pet operation.

Among the bittersweet winners of the deal include director Glen Richards, who was Greencross’s founding managing director and also a judge on televisions Shark Tank. His stake is worth $13.1 million under the deal.

Fellow director Paul Wilson, one of the founding backers of Petbarn, also has a 3.24 million shareholding worth $18 million.

But TPG in early 2016 had also approached Greencross with a potential offer of $6.75 a share, valuing the company’s equity then at almost $770 million. Like the current bid, the price would be reduced on the value of any dividend payouts.

At that price, Dr Richards’ stake in 2016 would have been worth $17.7 million.

But Greencross’s board at the time rejected that deal as one that “fundamentally undervalues” the company and was highly conditional.

Since then, revenues and raw earnings have risen at Greencross. But the company has also been beset by corporate upheaval — it has a new chief executive officer this year. Profits were also hit in 2018 and management on Friday warned conditions in the key vet market remained “challenging”.

In a statement, Greencross chairman Stuart James said the offer was the best among alternatives, including “stand-alone value creation opportunities”. TPG’s Australian and New Zealand chief Joel Thickins said the business would “continue to grow”, although TPG declined to outline plans further.

A vote on the deal would be conducted in the first quarter of calendar 2019, according to bid documentation out on Monday. A successful bid requires investors to vote more than 75 per cent of stock in favour of the deal, and for more than 50 per cent of individual investors to back the offer.

The deal could be sealed by the first half of calendar 2019.

Bruce McLeary, an analyst with Burrell Stockbroking, said the long-drawn out nature of the scheme bid could result in another takeover predator approaching.

“It’s a good opening gambit,’ he said of TPG’s offer. He recommended investors hold on to stock for now, noting a dividend was due and had the tax benefits of franking creditors for eligible local shareholders.

Among the beneficiaries of the deal include current and former management of Greencross, and backers of Petbarn, whose holding company was acquired by Greencross in 2013.

Fellow director Paul Wilson, one of the founding backers of Petbarn, also has a 3.24 million shareholding worth $18 million.

Jeff David, a former CEO who is understood to have worked with TPG on this bid and the earlier one, has a 3.26 per cent stake worth $21.7 million.

TPG said the overall deal was worth $970 million, including Greencross debt.

Greencross shares climbed 86c to $5.40 on Monday, just below the takeover offer price.

The company did not provide anyone for interview.