The country’s largest pharmaceutical products wholesaler EBOS Group is understood to be in talks with TPG Capital about acquiring its $3.5bn-plus pet care business Greencross and is positioning itself for a capital raising to fund the deal.
The $6.7bn Ebos, listed in Australia and New Zealand, is cashed up with net debt at $766m but running out of growth opportunities in Australia, which is believed to be the rationale for embarking on the acquisition.
It comes after it lost the highly lucrative Chemist Warehouse contract to Sigma from June 2024 as announced over five months ago.
It entered a trading halt on Thursday.
DataRoom reported in September that TPG Capital was believed to be testing buyer interest for the $3.5bn Petbarn owner Greencross.
Ebos and Greencross have a strong relationship, jointly owning the New Zealand pet retail business Animates.
Greencross has the largest vet services operation in Australia, with more than 160 clinics, including general practices, speciality and emergency centres, pathology labs and crematoria.
In 2021, it was understood that the vet services division generated a lot less than half the annual earnings before interest, tax, depreciation and amortisation, then said to be about $220m.
The retail side of Greencross has more than 230 stores operating under the names of Petbarn and City Farmers in Australia and Animates in New Zealand.
In addition to selling pet food and accessories through its store network and online platform, Greencross offers a wide range of pet services including grooming, dog washing, obedience trading and pet adoption.
The pet care industry is fiercely sought after given its strong trend of earnings growth and makes sense for Ebos as it already distributes pet care products through its pharmaceutical wholesale operations.
The interest by Ebos comes after Perth-based conglomerate Wesfarmers earlier eyed the business.
The question is whether TPG sells the company as a whole or just the interest that it retained after offloading 45 per cent to AustralianSuper and The Healthcare of Ontario Pension Plan.
TPG has already pocketed $1.57bn through its selldown.
That deal last year valued the business at $3.5bn, and since then, Greencross has purchased Habitat Pet Supplies, a Melbourne-based pet store chain with five stores that it plans to merge with its Petbarn and Animates retail business.
The deal will be a big bite for Ebos, and will be raising funds in a challenging market at a time that its share price has recently rallied.
Ebos, advised by Macquarie Capital, sells pharmacy products wholesale to more than 7000 hospitals as the largest and most diversified Australasian marketer, wholesaler and distributor of healthcare, medical and pharmaceutical products and animal care brands.
It generates $12.2bn in annual revenue operating in 108 locations across Australia, New Zealand and Southeast Asia.
It was previously speculated as a suitor of pet care businesses with The Real Pet Food Company.
It also bid for Device Technologies, owned by Navis Capital.
In 2021, the group purchased medical device distribution company LifeHealthcare from Pacific Equity Partners for $1.17bn and raised over $700m to fund the deal.
In 2020, chief executive John Cullity said pet foods and treats performed strongly in recessionary conditions.
Greencross was founded in 1994 by vet Glen Richards and, after being listed, it was purchased by TPG Capital during 2019 in a $675m transaction.
TPG’s Greencross, advised by Jefferies, was earlier considering a float, but volatile markets places that option off the agenda.
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