Petbarn and Greencross Vets merge: CEO Jeff David tells …
Nov 20, 2013 – The deal sees Greencross acquire 100% of Petbarn’s owner, Mammoth……
In 2004, Jeff David, the founder of Petbarn, and Glen Richards, the founder of Greencross Vets, met and the seed of a plan to merge their businesses was planted.
Now, almost 10 years later, a $338 million deal has been struck, which sees the duo merge to generate a greater addressable market and capitalise on the “humanisation” of pets.
David told SmartCompany that, in 2004, Richards had opened a pet store next to his vet hospital in Townsville and David helped him establish the business.
“More recently we’ve sat on each other’s boards. Glen has been on the Petbarn board for the past eight years and I’ve been on the GreenCross board for the past six.”
The merged group will create one of Australia’s largest pet care companies, with a total of 224 stores and clinics across Australia and New Zealand.
The deal sees Greencross acquire 100% of Petbarn’s owner, Mammoth Pet Holdings, in exchange for 52.6 million shares to Mammoth shareholders. This represents 58.25% of the merged company’s share register.
David will be the chief executive of the merged company, Richards will be the managing director of veterinary services, while Stuart James will take on the role of non-executive chairman.
A number of reasons were identified for the merger including developing a retail and services model with a point of differentiation from competitors, strengthening of client and customer engagement, creating cross-selling opportunities and creating a combined addressable market of $7 billion.
Currently the veterinary services market in which Greencross operates is worth $2 billion, while Petbarn’s is $5 billion.
David says the “humanisation” of pets will also drive growth.
“It’s easy to understand when you think about how society has changed in terms of the way we engage with our children. We read stories all the time about mother’s putting on over-the-top parties for their kids,” he says.
“We’re doing the same thing with our pets. Instead of having dogs named Rover and Butch, we have Lily, Nelson and Camilla. We’re thinking about how we can improve our well-being, so we think about how we can improve the well-being of our pets too.”
David says taking better care of our pets is a good thing for society.
“For us it’s a good thing, but we also think society. There’s research which shows a reduced risk of suicide in young people in families with pets, and pets encourage old people to keep exercising and gives them the chance to be engaged and take care of someone,” he says.
The merged businesses expect to generate annual revenue of $443 million in full-year 2014, with a net profit after tax of $21 million.
David says the successful combination of pet services and retail businesses has been a proven hit in the United States and the United Kingdom.
“You’ve got PetSmart in the US which has around 1300 stores and is the largest pet retailer in the world. Sixty per cent of their locations include a store and a vet,” he says.
“In the UK, the largest pet retailer is a group called Pets at Home, which has over 300 stores and 33% of their outlets have a vet and pet combination.”
In 2012, PetSmart had revenue of $US6.8 billion and Pets at Home had revenue last financial year of $598 million.
David, the owner of a dog and two cats, says in this respect Australia has been behind the trend of combining vets with pet retailers.
“The opportunity for us is to look at how we can capitalise on the trend for well-being for our pets and providing Australian consumers with the best possible care for their loved animals,” he says.
David says “pet parents” in Australia are looking at ways to better care for their pets, but penetration rates of premium products still lag the US, where there is a 25% market penetration of top-quality products.
Both Greencross and Petbarn have been identified as high-growth companies, with more than 25% earnings growth over the past four years.
David says this will allow both businesses to merge and retain staff numbers.
“With our growth stories, it’s not about the staff we need to take out; it’s about our shared services we can develop together. So there will be no redundancies,” he says.
Since announcing the merger last week, Greencross shares fell 8.64%, before lifting in the past two days by 19.41%.
The merger still needs to be approved by shareholders, but David is confident the deal will be approved by January.
“Judging from the reaction of the share price you’d have to say that it will be approved. Most people understand the benefit of the combination of the two businesses. We both have a strong track record of earnings growth.”
Source: TheAustralian
IN merging with the country’s biggest pet-care chain, Greencross Vets (GXL, $6.30) has seized an opportunity in a $5 billion sector so far overlooked by the likes of Woolies and Wesfarmers.
In a $330 million scrip deal, the Brisbane-based vet consolidator will buy the private Mammoth Pet Holdings, which owns the Petbarn chain in Australia and Animates in New Zealand. “It’s transformational and it’s compelling,” says Greencross chief Glen Richards of the deal, which more than triples the company’s revenue.
While Petbarn boasts 120 “big box” format stores in Australia, it accounts for only 4 per cent of the fragmented sector. True, supermarkets account for 44 per cent of the pet supplies market, but their offerings are limited to basics such as dog food.
In the current year, the greater entity is forecast to generate more than $440m of revenue and $50m of EBITDA. Mammoth itself is forecast to generate $312m of revenue in the current year, for EBITDA of $34m.
While there’s modest cost savings on offer, Greencross is eyeing revenue benefits from customer cross-selling. Petbarn has 1.1 million members in its Friends for Life loyalty program, so why not offer a special deal on Fido’s desexing? The parties have experimented with co-located stores and clinics, common in the US and Britain. A salient point is that Richards, Greencross managing director, and director Jeff David own 5 per cent and 14 per cent of Mammoth respectively.
Naturally, they left the room while the three other Greencross directors, including chairman Andrew Geddes, mulled the merits of the deal. The positive side to such intimacy is that the parties know where each others’ skeletons are buried, reducing the scope for unpleasant surprises.
Cannacord Genuity analyst Warren Jeffries is enthused by the proposed union, even though it was executed at a “full” price. “It might take a little bit of time to digest,” he says.
Allowing for $1.5m of annualised cost savings, Greencross expects the purchase to be earnings-per-share positive in the current year, with “double-digit” accretion in 2014-15 (relative to consensus market estimates of 28.6c a share).
Criterion last rated Greencross a long-term buy at $4.70 in June and maintains his call, on the presumption holders rubber-stamp the deal at a meeting in January.
Greencross is Australia’s leading veterinary service operator. The company owns and operates 97 pet-related practices, mostly vets, and has recently merged with Petbarn. The company has taken on a sizeable chunk of debt, but its growth is impressive. The share price has more than doubled in the last 12 months, with the market reacting positively to the recently settled merger.
Archer Growth Partners Best Friends Pet Supercentre
Australia’s Archer Growth has made the first investment from its new 300 million Australian dollar (US$307 million) fund, striking a partnership deal with the management of pet products and services provider Best Friends Pet Supercentre.
The group’s store network includes 11 supercentres which sell products in a “big box” store format and offer veterinary, grooming services, puppy pre-schools in Australia’s Victoria, New South Wales and Queensland states. Archer hopes at minimum to quadruple the chain’s current footprint.
Jason Henry for The Wall Street Journal
The deal size wasn’t disclosed, but the fund focuses on companies with enterprise values between A$20 million and A$150 million.
“It’s really a buy-and-build opportunity for us and a chance to provide growth capital to proven management who are staying invested,” Archer Growth managing partner Tim Spencer told Deal Journal Australia, referring to Best Friends Pet’s founders Bob Baily and Andrew Muir.
Mr. Baily – who will remain chief executive officer of the company – was previously managing director of Lion Nathan’s South Australian Brewing Company, and has been involved with 7-Eleven Inc.’s Australian franchise. Mr. Muir, a non-executive director of the group, is the founder and chairman of home-appliance and consumer-electronics retailer The Good Guys.
“We spent a lot of time looking at the industry which has been resilient in spite of global headwinds and the impact on consumers internationally and domestically, we really like the industry, and eventually found the right player to back,” Mr. Spencer said, adding that Grant Thornton made the introduction.
“In addition to normal foot-traffic, the supercentres are a destination because of services like grooming and puppy school. Staff educate owners and humanize pets by focusing on factors like fitness and diet,” he added.
Certain supercentres also host events like “Howloween” costume contests. Best Friends advocates the adoption of abandoned pets through The Lost Dogs Home, and sells small pets but not dogs or cats.
The pet products and services industry isn’t foreign to private equity and venture capital investors.
U.S. middle-market buyout fund Brynwood Partners owns pet boarding, training and related services provider Best Friends Pet Care Inc. Previous owners of that business include Invesco Private Capital, Merrill Lynch Global Private Equity, Consumer Venture Partners and East River Ventures, according to S&P Capital IQ.
U.S.-headquartered private equity groups TPG Growth and Leonard Green & Partners own California-based PETCO Animal Supplies, which in turn owns a stake in Australia and New Zealand group Petbarn. Previous investors in PETCO include Thomas H. Lee Partners, Canterbury Capital Partners and Goldman Sachs Asset Management, according to S&P Capital IQ.
Australia’s own CHAMP Private Equity and Pacific Equity Partners expressed interest in pet food producer VIP Petfoods late last year, while in December, NYSE-listed Spectrum Brands Holdings Inc.’s United Pet Group division bought pet grooming manufacturer FURminator for US$140 million.
Supplied
Family-owned Inghams sold to global private equity giant
- March 12, 2013
- Sophie Langley
Global private-equity firm TPG has bought Australia’s largest poultry producer, Inghams Enterprises Pty Ltd. for about $850 million. TPG outbid rivals including Blackstone, Affinity and Chinese agribusiness company New Hope.
Inghams, which also operates in New Zealand, was founded in 1918 in bushland in Sydney’s South-west by Walter Ingham, who bought six hens and a rooster for his son. Ingham’s son, also called Walter, grew the business, and it passed to his sons, Jack and Bob, when he died in the 1950s. Jack Ingham died in 2003, and Bob continued to run the business until July 2012, when he put the company up for sale.
TPG will retain Inghams’ existing management. “An important part of the decision for me was finding a buyer who would ensure that our customers will continue to receive the highest level of service and our employees would be well looked after. I believe I found that in TPG,” Mr Ingham said in a statement.
Inghams Enterprises is Australia’s largest poultry producer, with sales of over AU$2 billion in 2012. According to Retail Media’s 2012 ‘Retail World’, Inghams has 45.1 per cent share by value and 48.3 per cent share by volume of Australia’s $150.4 million poultry smallgoods market.
TPG is a global investor based in New York with several well-known Australian business investments. TPG, which has $54.5 billion capital under management, attracted considerable publicity with its structured acquisition of the Myer retail group several years ago.
Other major Australian investments include the private healthcare and hospital group HealthScope, transport infrastructure company Asciano (owner of Patrick Ports and Pacific National Rail), Mammoth Pet (Australia’s largest pet specific retailer, under the Petbarn banner), and Alinta Energy.
TPG is also the owner of the global US-based Burger King chain, Beringer Wine, and the European-based Strauss-Elite coffee group.
Source: http://ausfoodnews.com.au/2013/03/12/family-owned-inghams-sold-to-global-private-equity-giant.html
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Paul Wilson Co-founder and Executive Director of Petbarn
Since its establishment in 2005, Petbarn and its dedicated team of staff and suppliers have been striving to be the pet specialist of choice for the Australasian region.
With one of the biggest ranges of pet supplies and pet products in Australia, Petbarn has been serving the needs of pet-owners and -lovers for nearly a decade. Delivering advice, products, and services to Australian pet-lovers, while introducing smart retailing and strategic growth, has seen this company develop dramatically.
Paul Wilson, co-founder and Executive Director of Petbarn, established the company with friends Jeff David, Glen Richards, and two others in 2005. More recently, Petbarn struck a $338-million deal with Greencross Vets which saw Greencross acquire 100 per cent of Petbarn’s owner, Mammoth Pet Holdings, in exchange for 52.6 million shares to Mammoth shareholders.
With Greencross founded by friend and partner Glen Richards, who also served on the Petbarn board for eight years, it heralds an exciting change for Petbarn. The merged group has now become one of Australia’s largest pet-care companies, with a total of 224 stores and clinics across Australia and New Zealand.
Despite these successes, Paul hasn’t always been in the pet-care industry—first pushing trolleys while studying business at university and then working in the graduate program at Westpac. After realising that banking wasn’t for him, he moved into the oil industry in a sales- and marketing-focused role at Caltex. Paul says it was the start of a very fulfilling career.
source: http://www.theceomagazine.com.au/profile/paul-wilson
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http://www.theretailguy.com.au/eye-spy-petbarn/
March 9th, 2014 Petbarn
Eye Spy is my weekly shopping experience where I go and ‘mystery shop’ randomly a big corporate retailer in hope of finding some retailing gems to offer the small business retailer to help grow their business! I will in most instances refrain from naming the exact location of the store, but I’ll clearly name and promote the brand.
Date = 8/3/14 Retailer = Petbarn Location = South/East Brisbane
INTRO
For those of us who have a pet, dog, cat or other, we all know the upkeep it takes to just maintain a healthy and safe family pet. I have a 13 year old Beagle, and he’s been such a loyal and gentle friend since I adopted him from a respite in 2007. Getting towards his ‘twilight’ years, it’s important to keep him in tip top condition, especially with 2 young kids who climb all over him like a jungle gym:) So, whilst picking up some bones and worming treatment, I put my local Petbarn through this weeks edition of ‘Eye Spy’.
There’s a lot to like about our ‘furry friends’ when it comes to retail. The Australian ‘Pet’ retailing market has an estimated worth of over $5Billion, cross that over with an estimated $2Billion that lies in the Vet Health market, there’s a lot of reasons why just in November, Petbarn and GreenCross Vets combined forces. Privately owned with 224 stores across Australia & New Zealand. Petbarn was established in 1979 and it’s head office is in Alexandria, Sydney. GreenCross Vets recent acquisition of Mammoth Pet Holdings, Petbarns owner, Petbarn & GreenCross Vets merger saw a transaction in exchange for 52.6 million shares to Mammoth shareholders. This represents 58.25% of the merged company’s share register. The estimated turn over according to Executive Chariman Jeff David for 2014 will see the combined forces top $443Million in sales and $21Million in profit after tax. It’s evident to see that Petbarn is now regarded as the number 1 player in the pet market for Australia. So, let’s see if some of this ‘strategy’ transcends onto the shop floor for it’s end users.
Shop Entrance – Shop front entrances are so vitally important. It’s the retailers ‘gateway’ to their customers. If it’s closed up, cluttered with stock, tarnished with smeared, dirty windows and old signage, then that’s like Buckingham Palace having an overgrown garden and rusty gates. I measure ‘Shop Entrance’ based on how it makes me feel as I approach. I look for it to be open, clean, inviting and above all, it needs to deliver an emotional message to me with what this retailer is about, and what’s going on inside. I look for a sense of ‘curiosity’ or ‘value’ driven messages compelling me to come in.
For: Glass fronted, full signage from top to toe with big bright messaging you can see and read from over 50 meters away. There’s no mistaking the bold ‘yellow & black’ of Petbarn’s corporate colours and branding. My local store is located within a home maker centre, so passing traffic if you like could well be 100 meters away, hence the reason to be BIG, BRIGHT and BOLD. On entering the store, I immediately noticed something that really sets the scene for these stores, which is “Pet’s Welcome” and just to the right of the entrance, there is a drink station for dogs. BRILLIANT! The entrance is wide, which is highly necessary as there is the option to use a shopping trolly to lug those 20kg bags of dog food back to the car.
Against: Couldn’t really find anything! The glass was clean, had relevant store opening and payment options displayed to the left of the entrance. It was easy and inviting to walk into. Well branded with immediate ‘Deals & Saves’ as you enter right in front of you. For any big box retailer looking for an example of how to set up a ‘bulky goods’ shop entrance, go and visit Petbarn, they do this brilliantly.
Petbarn Shop Entrance = 10/10
Store Ambience – Store ambience is my measure of the aesthetics, mood, accessibility and shop-ability. I’m looking for spacious environments that enhance one’s ability to make purchase decisions. I literally measure my heart rate and see if it’s risen, for me I know, if I’m frustrated, my heart rate rises, therefor I become impatient and disillusioned with why I’m in the store. I look at the lighting and see if it’s showing off what needs to be displayed, which is always stock and signage/promotion.
For: Well lit up, BIG WIDE isles, easy to navigate. It was perfect from a ‘stand back and look for what I’m after’ point of view (see image). I could stand and think “OK, I want dog bones, where would they be?” and I could see where they are from the other side of the store. LOVE THAT! It all makes sense too, if you need dog wash, it’s in the isle where dog washes, and other medical treatments or health options are. A 3 year old could find what they were looking for if they wanted to, infact, my son did, which was the kittens in cages very quickly 
The signage is brilliant! It’s 100% consistent, I couldn’t find 1 product that was missing a price tag, sign or indicator. #petbarn also make brilliant use of their signage to tell interesting facts about your pets! What a clever thing to do. So instead of just have $19.99 on an A4 sign,
They have this > 
Against: Believe it or not, NO IN STORE MUSIC? I know, maybe it’s something to do with the animals, I’m not sure? But aside from the occasional bit of noise the instore pets may make, or the register transactions being processed, it was a little off putting having a shop so quiet. I also noticed 2 LCD screens not turned on. 1 was for a promotional stand and the other was behind the front counter. Would have liked these to be on and doing their thing. Waste of time and money having them in the shop if they’re switched off.
Petbarn Store Ambience = 7.5/10
Stock Range & Offer – What I’m looking for is a) is there an offer or range of stock that supports the overall brand message if there is one, or target customer needs and market trends and b) how is the range architecture and blue print? Is it clean, with clear examples of good, better, best range offers? Does it have clearly defined categories that increase a customers ability to look, find and buy?
For: For me, I can’t see any holes. If it’s for a basic domestic pet, be it dog, cat, fish, rabbit, or bird, they have it. That said, there’s a real sense that the buying team really understand how to build range architecture and eco systems. They know what they’re doing and it’s evident that there’s industry expert influence (be it Vet) and advice to get the range concise and succinct. It’s just so easy to shop in a Petbarn, and I can only count the 1 time I’ve been in prior and the dog food I’m after wasn’t available.
Against: For a store that has themselves firmly positioned within a home maker centre, and I can only presume that most #petbarn stores are, I think that they need to work on some ‘stronger’ instore specials and ‘multi buy’ options. When you have a customer who has to drive and park specifically to get to your store, I firmly believe that the more ‘Muffins – 1 for $3 OR 3 for $4′ you can strategically create, the better. The aim is to compliment the core or primary product, in #petbarns case, it’s say dog food, with as many ‘Multi Buy’ or ‘Impulse’ options as you can to benefit the customer. So, if someone is buying dog food, either have a multi price deal for more bags, or have a deal associated with the dog food which creates an additional purchase. Now, I know that Petbarn do have multi deals on ‘Some’ dogfoods, but I would almost insist, it needs to be on all, and they need to work harder on ‘bundle’ offers on cheap accessories etc.
Petbarn Stock Range & Offer = 8/10
POS & Front Counter – Having a clean, accessible, identifiable yet non-dominant sale counter is a corner piece of any great retailing layout. It should be a large enough area that customer can feel at ease when parting with cash, but not so big as to create an immovable barrier that staff get behind and hide.
For: The structure of their front counter is absolutely brilliant. It’s very similar to say a larger retailer like Target, but on a smaller scale. Has a cue station with impulse items merchandised along it beautifully. The terminals have all of the relevant information required to make a purchase, and there’s some fantastic ‘added’ value such as strong promotion of the loyalty program, pet insurance and a clip chain to clip your dog to while you make your purchase, (see images) – I LOVED THAT IDEA!
Against: There were boxes of stock on the counter!! You know what this says to me, the manager is trying to do too much, when on a Saturday, it should simply be all about just serving customers and keeping the place in tip top shape. I see this happen so so much, where on a Saturday morning, the manager thinks, “Ah, it’s quiet, I’ll go and grap 4 boxes of stock for the register operator to unpack!” and then come 10am, boom, it’s busy, and those boxes just sit there like the dirty big eye sores that they are during your busiest days trade. If that wasn’t there, if the register area and front counter was clean and crisp, it would have been another 10/10!
Petbarn POS & Front Counter = 7.5/10
Sales & Customer Service – This is where the deals are done. I always try and engage a customer service representative to greet me, start up some general conversation and then move me into an ‘interview’ process where they’re trying to identify my needs and wants. I also look for the sales persons ability to package up a sale, close the sale, and or offer to come back ensuring the future of our relationship (between retailer and customer)
For: When I spoke with the staff, they were nice. The problem was, on a Saturday morning at 10am, there were 4 team members, 3 of whom were on the registers processing sales, so the rest of this big store was left to 1 girl to try and service. Not good enough. When I got to the front counter, I asked the team member for a specific type of worming treatment for my dog, and asked if there was a difference between the Inteceptor brand or another similar brand. The team member knew her stuff, and said I was on the right track with brand I had originally asked for. She then asked if I would like a 3 or 6 month treatment, and processed the sale efficiently.
Against: As I said, the team seemed overwhelmed by the ‘pace’ of the store. It was like it caught them off guard? In any sense, it felt as though there was a rostering disconnect there when I was in the store. I also wasn’t that pleased with way my sale was processed. Although it was efficient, I wouldn’t have said it was friendly and mind blowing. I’m already a member of the loyalty program, so there wasn’t a need to push or ask to join on that, but I noticed other offers which could have been mentioned such as Pet Insurance. Aside from this interaction, I couldn’t gauge how a sales process is offered based on the fact that again, there wasn’t an offer of service. No greeting, Nothing till I got to the tills.
Petbarn Sales & Customer Service = 5/10
Total Experience = 38/50
Bonus Points?
Yes there are! I’m awarding 3! Yep, 3. Although my shopping experience lacked a little polish, all in all, I think Petbarn are certainly on the right track.
Bonus point 1 = Instore Services. They offer soo many instore services, from dog water refreshments, to clipping your dog to a chain while paying for goods, they even have a well house ‘DOG WASH CENTRE’ inside the store. Genius!
Bonus point 2 = Instore Signage. So many signs have interesting or valuable messages on them. This obviously creates that magic word ‘THEATRE’ but also, it’s a great selling tool.
Bonus point 3 = Consistent Theming! Throughout the entire store, everything is completed consistently! From the corporate colours, to the use of fonts, to the fixtures & fittings. There’s just no mistaking that you’re in a #petbarn store. Well done!
Adjusted TOTAL EXPERIENCE = 41/50 – A really solid store, so many things are great, just lacks a service touch. Could have so easily been 50/50
My 3 key take aways from shopping at Petbarn were:
1 – Get a colour, a font, and own it! Everything that Petbarn does is done in consistent corporate colours and themes.
2 – Offer as much FREE value as possible – So Petbarn offer so many additional free services (as mentioned) which really helps create theatre within their stores.
3 – Know exactly what you NEED to range, and not what you CAN range – As stated, Petbarn’s range is rich, fruitful but still concise and succinct. It’s been well created and curated.
Well that’s Eye Spy Episode #5, stay tuned for next week, I said that I’m going to go and tap on the shoulder a retailing franchise who I believe do customer service and theatre, better than anyone else in the business. I‘ve done the visit, and BOY Oh BOY, has this retailer got SERVICE just NAILED!
Kristian
TheRetailGuy
rspcaanimalcruelty 