Strategic rationale for the acquisitions
A. Acquisition & Purchase Price Details
Superior Food
Acquisition of a 100% interest in SFG Group Holdings Pty Ltd ("Superior Food").
The purchase price includes:
1. At the Enterprise Value (EV) 1 level:
2.
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A fixed upfront EV of $390.0m², payable at completion
Plus a potential incremental Group Earn-Out payment of up to $22.3m (Maximum), which is conditional upon on Superior Food achieving an underlying EBITDA (pre-
AASB16) of $46.0m for the year ending 30 June 20243. Based on Superior Food's trading results to Dec-23, Metcash currently expects that the Maximum Earn-Out of
$22.3 million will be payable. The earn-out is payable to all shareholders at the same time as the Debt Adjustment (refer #2 below)
Which results in a total potential (EV) of up to $412.3m
Plus a deferred Executive Earn-Out4 payment to the Superior Food CEO (who is an existing shareholder), representing deferred purchase consideration in relation to his
Equity Roll. The Equity Roll is an amount of up to $5.0m (Equity Roll). The deferred purchase consideration is payable following the occurrence of certain trigger events
(over the ~4 year period to 30 April 2028), in which case the actual EBIT (post-AASB16) is tested against an EBIT vesting scale. The Maximum Earn-Out amount is scaled
in proportion to the Equity Roll amount, with the Maximum Earn-Out amount being $11.0m when the Equity Roll amount is $5.0m. The Maximum Earn-Out is
conditional upon Superior Food achieving an EBIT that significantly exceeds the pro forma Oct-23 LTM EBIT
Plus/minus certain other customary purchase price adjustments, including in relation to net debt and working capital (Debt Adjustment), measured at completion and
payable to all shareholders
The share purchase agreement includes certain conditions precedent, including in relation to ACCC clearance. Subject to ACCC clearance, completion is expected to occur in the
first quarter of FY25.
Enterprise Value (EV) represents the purchase price calculated on a cash/debt free basis.
1.
2.
Less the Equity Roll amount in relation to the Executive Earn-Out.
3.
4.
The Maximum Group Earn-Out is capped at $22.3m and is payable if Superior Food achieves an underlying EBITDA (pre-AASB16) of at least $46.0m in respect of the year ending 30 June 2024. A partial earn-out is payable, on a straight-line basis, if EBITDA is between $42.9m (Nil
Earn-Out payable) and $46.0m (Maximum Earn-Out payable).
A component of the purchase price payable to the Superior Food's CEO will be deferred, of up to $5.0m (Equity Roll), and will instead be partially at-risk and payable as deferred purchase consideration. The earn-out amount is payable upon the occurrence of certain trigger
events, in which case the earn-out is tested by comparing the actual EBIT (post-AASB16) in relation to the previous financial year ending 30 April (Reference Year) against an EBIT vesting scale. If no trigger event occurs by 30 April 2028, then the deferred purchase price is
calculated using Superior Foods actual FY2028 EBIT. The Executive Earn-Out has not been included in the pro forma EPS and implied multiple amounts, as it is only payable if there is growth above the pro forma Oct-23 earnings levels.
Metcash
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