Investors were throwing their weight behind two companies tapping the market for acquisitions on Thursday, but they remain wary about EBOS Group buying TPG Capital’s business Greencross.
They believe the private equity firm will want top dollar for its pet retailer and vet chain and suspect the shares will fall sharply if a deal gets announced.
Meanwhile, they applauded Karoon Energy for spending $1.15bn on oil and gas assets in The Gulf of Mexico, which came with a $480m equity raising, and the acquisition and raise by insurance broker Steadfast Group, which is buying Sure Insurance and tapping the market for up to $310m.
EBOS remained in a trading halt on Thursday as the market awaited news about a potential deal with TPG on Greencross, thought to come with an asking price well over $3.5bn.
The pair have held talks, say sources.
The $6.7bn EBOS, listed in Australia and New Zealand, has net debt at $766m but is running out of growth opportunities in Australia, which is believed to be the rationale for embarking on the acquisition with its joint venture partner on the New Zealand pet care business Animates.
It comes after it lost the lucrative Chemist Warehouse contract to Sigma from 2024.
Greencross has the largest vet services operation in Australia, with more than 160 clinics, including speciality and emergency centres, pathology labs and crematoria.
In 2021, it was understood that the vet services division generated 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 NZ.
In addition to selling pet food and accessories through its store network and online platform, Greencross offers a wide range of services including grooming, dog washing, obedience trading and pet adoption.
The pet care industry is fiercely sought after given its trend of earnings growth and makes sense for EBOS as it already distributes pet care products through its wholesale operations.
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.
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