The Wesfarmers Ltd (ASX: WES) share price has pushed higher in morning trade after announcing a new acquisition.
At the time of writing the conglomerate’s shares are up 0.5% to $38.73.
What did Wesfarmers announce?
Just a couple of weeks after entering into a scheme of arrangement with lithium miner Kidman Resources Ltd (ASX: KDR), this morning Wesfarmers announced that it has entered into an agreement to acquire Australian online retailer Catch Group for a cash consideration of $230 million.
It will be funded from existing debt facilities and is not expected to impact Wesfarmers’ existing credit ratings.
Catch Group is a profitable and cash-generative business that operates an online business model offering branded products on a first-party basis and a third-party online marketplace. Its online operations are supported by two fulfilment centres in Victoria.
Wesfarmers managing director, Rob Scott, believes the acquisition is consistent with the company’s disciplined approach to capital allocation. This includes investment in opportunities adjacent to its existing businesses.
It is also consistent with Wesfarmers’ focus on investing in and building its data and digital capabilities.
Mr Scott added: “Catch Group has a high calibre management team and a leading e-commerce platform with quality fulfilment assets. This acquisition represents an opportunity to accelerate Wesfarmers and Kmart Group’s digital and e-commerce capabilities whilst continuing to invest in the unique customer and supplier proposition provided by Catch Group.”
Should the acquisition complete successfully, Catch Group will operate as an independent business unit under the oversight of Ian Bailey, the managing director of Kmart Group.
Mr Bailey said: “We are excited to work with the Catch team and look forward to leveraging our capabilities to grow the business and accelerate the customer-driven, omni-channel initiatives across Kmart and Target.”
He sees a lot of positives for both the acquired business and Kmart Group’s existing businesses.
Adding: “This will further drive best practice in supply chain, fulfilment and online execution across our brands, including opportunities for Target to secure online fulfilment capacity and productivity benefits. Catch will also benefit from the support of Kmart Group’s scale and capabilities to drive its continued growth in its existing marketplace business.”
The acquisition is subject to a number of conditions including approval by the Australian Competition and Consumer Commission merger clearance. A decision on this is expected in the coming months.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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