TPG Capital tipped to be courting Wesfarmers for Greencross sale

Greencross has the largest vet services operation in Australia, with more than 160 clinics.

Speculation is mounting that TPG Capital is testing buyer interest for the $3.5bn-plus Petbarn owner Greencross and some are pointing to Wesfarmers as the potential suitor.

Working on a potential sale of the business, which owns veterinary clinics and a trans-Tasman pet-care retail business, is investment bank Jefferies, and there is a view that the $60bn listed Perth-based Wesfarmers is showing some interest.

The question is whether TPG would sell 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.

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.

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.

The logic is all there for Wesfarmers to buy Greencross.

It ticks all its boxes in that the vet clinics could fit well into its recently created healthcare unit, while it is already moving into pet retailing through Bunnings, and synergies could exist through its other retail businesses, Kmart, Target and Priceline pharmacy owner API.

The question is whether it would buy off TPG which is expected to have overly enthusiastic expectations for the price.

TPG has already pocketed $1.57bn through its selldown, so perhaps the price tag won’t be that large after all.

Looking at it pragmatically, even if a float were the most logical option for TPG when it came to Greencross, it was unlikely to be possible any time soon because of poor equity market conditions.

And private equity buyers are not paying up in the current market due to the cost of debt.

So if they wanted to exit through a float or a private equity sale at top dollar, that could make any deal years away.

Much depends on what fund the asset sits in across the US-based private equity firm and whether it is at the end of its life.

Wesfarmers, which did not comment on whether it was weighing an acquisition, would be familiar with the business given that it looked at Greencross when Credit Suisse and Morgan Stanley ran a sale process in 2021.

Since that time, some suitors had been eager to buy just part of the company – either the vet clinics or retail – so a break up could be one option for TPG, although unlikely.

Other suitors that lined up at that time were European private equity firm EQT, CVC Group, Kohlberg Kravis Roberts and Hellman & Friedman.

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.

It comes as Jefferies also sells the $1bn-plus vet care network Vet Partners that generates about $100m in annual earnings.

First round bids were received just over a week ago and among the likely early suitors are expected to be Kohlberg Kravis Roberts, Bain Capital and EQT.

Vet Partners, which bought the listed National Veterinary Care in 2020, has more than 270 vet care clinics across Australia and NZ and is owned by National Veterinary Associates in the US.