Pets and vets company Greencross is set to recommend shareholders accept a takeover bid from global private equity giant TPG Capital.
It's understood TPG secured the board recommended deal with a bid at $5.50 a share, or about 10-times forecast EBITDA and about a 50 per cent premium to where the company's shares were trading only a couple of months ago.
The deal is to be done via a scheme of arrangement and announced on Monday, sources said.
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It comes after TPG spent weeks inside Greencross' data room, seeking to map out a future for the pet goods retail stores and veterinary roll-up company. Street Talk revealed they were first on the scene on October 9, when they were locked in what was at the time seen to be exclusive talks.
The talks ramped up last week - also as revealed by Street Talk - with the parties seeking to have a deal done by the time of Greencross' AGM, on Friday. Instead, it took until over the weekend to secure the agreed deal.
Other firms - including BGH Capital - since joined the data room, however sources said TPG had blown its rivals out of the water and left Greencross with no choice but to accept and recommend the offer.
It's expected to be TPG's biggest Australian acquisition since former CHAMP Private Equity dealmaker Joel Thickins took the reins in 2016. TPG has acquired a couple of small health sector businesses, including testing business Novotech and Healthscope's Asian pathology business, but nothing close to the $1 billion mark like Greencross.
TPG is advised and funded by UBS and Credit Suisse, while Macquarie Capital and Allier Capital advised Greencross.
The biggest question in TPG's minds as it ran due diligence would've been the impact of US giant Amazon.
The online retailer launched in Australia this year and has targeted the pets category since August. In the United States, where the retail market is bigger and more advanced than Australia's, bricks and mortar pet retailers PetCo and PetSmart have been hit hard by online rivals. To illustrate the point, debt in the two incumbents is now trading at about 70¢ in the dollar.
The bottom line is that pet retailing in Australia is only expected to get tougher. And with the company's net debt approaching 3-times earnings, it's easy to understand why Greencross shareholders called on their board to engage with TPG and other suitors.
