Metcash Limited (ASX: MTS) shares will be out of action again on Monday.
That's because the wholesaler has just asked for its shares to remain suspended until Wednesday.
What's going on with Metcash shares?
Metcash requested that its shares remain offline so that it can undertake a $325 million capital raising.
According to the release, the company aims to raise the funds via a $300 million fully underwritten institutional placement and a $25 million non-underwritten share purchase plan.
The placement is being undertaken at $3.35 per Metcash share, which represents an 8% discount to its last close price.
Why is Metcash raising funds?
The proceeds from the capital raising, along with its existing cash and debt facilities, will be used to acquire three strategically aligned businesses that deliver further diversification and resilience, and an even stronger growth trajectory.
The main acquisition will be Superior Food for an enterprise value of up to $412.3 million. It is a leading Australian foodservice distribution business. Management believes it is a logical extension of Metcash's Food strategy and will enhance its core Food wholesale and distribution capabilities.
Superior Food has a large network of ~600 suppliers with a product range comprising ~15,000 SKUs. Products are delivered to ~20,000 customers across a diverse range of markets including quick service restaurants, corporate caterers, cafés, restaurants and hotels.
The total acquisition price implies 9.0x FY 2024 estimated underlying EBITDA before annualised synergies and 6.9x including annualised synergies of ~$14 million.
Another acquisition the company is making is Bianco Construction Supplies for an enterprise value of $82.2 million. It is a construction and industrial supplies business servicing the South Australia and Northern Territory trade market.
The third acquisition is Alpine Truss, which is one of the largest Frame & Truss operators in Australia. Metcash has agreed a deal valued at $64 million for the business.
The good news for shareholders, and potentially Metcash shares when they return to action, is that the transactions are expected to be earnings accretive. Management estimates that they will be mid-single digit earnings per share accretive on a pro-forma October 2023 last-twelve-month basis including synergies. In addition, they are expected to be accretive to Metcash's margins.
Metcash CEO, Doug Jones, said:
Metcash is the logical owner of Superior Food, and the acquisition cements our position as the largest wholesaler and distributor of food to independent businesses in Australia. Superior Food provides a compelling opportunity to expand in an attractive and adjacent growth market through an industry leading player with an established national platform for future growth. The combination of the two businesses unlocks diversification benefits, procurement savings, range expansion and extends our purpose of Championing Successful Independents.
