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Woolworths purchases majority stake in Petspiration group for AUD 1.25billion

Vice President: Aum Raithatha

Analysts: Aanya Chowbey, Kostadin Iliev, Sia Jain, Steven Brakespeare

Deal overview:

Acquirer – Woolworths Group Limited

Acquiree - Petspiration Group (PETstock Pty Ltd)

Deal size: AUD 1256.00 million

Buy side advisors: Undisclosed

Sell side advisors: Undisclosed

PETstock overview

PETstock Pty Ltd offers pet care services, including grooming, schooling, veterinary, day-care, and adoption (S&P Capital IQ). The company provides pet food, products, and accessories. PETstock Pty Ltd was incorporated in 2001 and is based in South Melbourne, Australia.

Woolworths overview

Woolworths Group Limited operates retail stores in Australia and New Zealand (S&P Capital IQ). It has segments for food, B2B, and discount general merchandise. The company also engages in wholesale operations. It was formerly known as Woolworths Limited and changed its name in December 2017. It was incorporated in 1924 and is based in Bella Vista, Australia.

Prior to the transactions Woolworths has had a couple more acquisitions in the last 2 years namely Miranda Mall, a physical mall (AUD 68 million), Limited which is an online marketplace for retail products (AUD 153.66 million) and a tavern by the name of Pelican Waters Tavern (AUD 8.21 million), however, the size of the deals cannot be compared to the acquired majority stake in PETstock.

Deal Structure

Woolworths Group Limited agreed to acquire a 55% stake in Petspiration Group from Auctus Investment Group Limited and others for approximately AUD 1.3 billion on 15th December 2022 (S&P Capital IQ). The deal is structured so that Woolworths pays AUD 586 million in cash and takes on debt assumption of AUD 670 million from the target company. Woolworths will finance this deal by selling a minority stake in Endeavour Group. Shane and David Young will remain as CEO and Managing Director.

The transaction is expected to close somewhere in the middle of 2023. Currently a clearance letter has been submitted to The Commerce Commission and a decision is scheduled to be made by 3rd of April, but it will likely be postponed as the investigation progresses.

Industry Analysis

The pet industry has seen a massive boom in recent years largely due to COVID. The number of pet dogs alone has risen by more than 1 million during the pandemic severely impacting the pet care industry. Australians really love pets, in 2022 69% of households had some sort of pet with dogs being the most popular - 48% of the households, (Buelva, 2022). Furthermore in 2022 Australians have spent more than AUD 33.2 billion on food, healthcare, grooming and accessories for their pets.

Source: Statista, 2021

Groomers cannot keep up with the demand. There are 2 main factors affecting this trend. Firstly, a popular breed of dogs in Australia are poodle crosses which don’t shed a lot but are prone to matting and require more regular grooming by professionals. Secondly, there’s a rise in the number of pets owned but the number of pet groomers is still lagging. Right now, the country is experiencing a high demand for professional groomers that can deal with a range of breeds and species. This has led people to have to book their appointments for the whole year in advance for the groomer to consider tending to their pet. People have also started taking their dogs to a groomer more frequently as more Australians opt for the option to work at home and spend time with their pets, they realise that more frequent washing and grooming is needed.

The global veterinary industry, according to the research (Grand View Research), is set to have a CAGR of 5.7% from 2022 to 2030 showing a good growth prospect, however, in Australia it the CAGR is almost twice as big being 9.75% (Mordor Intelligence). The Pets and Pet Supplies Retailers in Australia Market Size Growth from 2018–2023 has also shown a very good, annualised increase of 7.4% indicating that the Pet industry is in a very good position in Australia (IBISWorld, 2022).

Source: IBISWorld, 2022


Woolworth's financials

Woolworth has a revenue of $62.1 Billion, operating income of $3 billion and a net income of $1.7 billion. There has been a 6.9% increase in revenue between January 2022 and January 2023. The primary industry it belongs to is Food Retail, making its acquisition of PETstock significant in its market expansion in Asia Pacific region, specifically, Australia and New Zealand.

Other relevant financial information is listed below:

Its EBITDA margins have been steadily increasing, with a margin of 16.7% as of January 1, 2023. Nonetheless, they are expected to decline gradually, to about 8.9% by June 30, 2025. As the graph below highlights, Woolworths benefitted by the onset of the COVID-19 pandemic, leading to a staggering increase to $7.9 million in net income in 2022. This was primarily because of lockdown restrictions that led to an increase in pet purchases by households. As the graph below indicates, pandemic driven pet population growth resulted in the spike of net income in January 2022, but this is expected to gradually stabilise, illustrated by a dip in net income for 2023.

Source: Capital IQ

Moving to PETstock’s analysis, the sales price depicts a multiple of 11x EV/EBITDA “based on the past 12 months of earnings to September of $158 million”. A multiple below 10 is considered healthy, hence the multiple of 11x seems to be a good indicator of the health of the deal.

Since it is a private company, a discounted cash flow analysis is not possible. Nonetheless, its EV/EBITDA multiple can be compared with the average of the industry. The average multiple is 14.11, making this deal undervalued.

The past 5-year performance of Petspiration indicates strong sales growth. As the deal allows the founders to continue owning a material stake in the company, the leadership would remain the same, and allow an organically smooth transition for ‘joint value creation’. Perspiration was ranked 2 in Australia and New Zealand as a specialty pet retailer.

Comparable Companies

Important Note for comparables: PETstock was privately owned so no financial data was available to complete the comparables, therearehowever similar companies which wecan exploreto seewhatfigures Woolworthswas looking for when they acquired PETstock.

Precedent Transactions

FASA Group - Darling Ingredients has completed the acquisition of FASA Group, Brazil's largest independent rendering company, for a purchase price of approximately R$2.8 billion Brazilian Real in cash ($542.6 million USD at today's exchange rate). This acquisition will allow Darling Ingredients to grow its specialty ingredients business in Brazil and further de-risk the supply chain by providing an additional source of non-food based, low-carbon waste fats to be used in the production of renewable diesel and sustainable aviation fuel.

Wenger Manufacturing - Marel, the provider of full-line solutions, software, and services to the poultry, meat, and fish industries, has acquired Wenger, a leading provider of extrusion technology and drying systems for the pet food, aqua feed, and human snack industries. With the acquisition of Wenger, Marel is well positioned to capitalize on providing transformational solutions to the large and attractive growth markets of pet food, plant-based proteins, and aqua feed. Marel sees great opportunities and is committed to investing in the combined business to accelerate growth. The acquisition is expected to be margin and earnings enhancing, and planned initiatives include expanding manufacturing capacity to respond to high demand in Wenger's core markets.

Gelnex - Darling Ingredients acquired all the shares of Gelnex, a leading global producer of collagen products, for approximately $1.2 billion USD in cash. This acquisition will allow Darling Ingredients to continue to grow its presence in the health and nutrition market and increase its production capacity for grass-fed bovine collagen in South America to meet the future demand of its collagen customers worldwide. The acquisition of Gelnex will also complement Darling's health brand Rousselot, a leading manufacturer and worldwide supplier of hundreds of collagen products made from bovine, porcine and fish sources.

Deal Rationale

Revenue Synergies

Expanding into new markets:

The grocer Woolworths has been looking for newer avenues since growth in grocery shopping slowed post Covid with people returning to eat in cafes and restaurants. Surging inflation and cost pressure also left a dent on its income statements (Akhand, 2022). According to CEO Brad Banducci, specialty pet is a large and rapidly growing retail segment worth $10b with a 5.6% CAGR. Prior to this deal, Woolworths Group had a limited presence in this area (Anon, 2023). As Petspiration is the second largest player in the segment across New Zealand and Australia, the deal will allow Woolworths to gain a 55% stake in order to meet their customers’ pet family needs with a range of specialty pet products and services as well as strengthen loyalty programs. Since Petspiration is well positioned to continue to grow strongly, as the business builds out and consolidates its national footprint and brand awareness as confirmed by a strong revenue of $979m and $158m EBITDA in the last twelve months, Woolworths is expected to generate strong revenues.

Leveraging a new customer base:

With Petspiration’s network of 276 retail stores, 65 vet clinics and 162 grooming salons as a private company, the acquiree can strongly lever Petspiration’s 2.4 million + customer base which will allow the firm to gain strong revenues from this new line of business and as well as extend these offers to its previous customers in the retail segment.

Cost Synergies

Integration of operations:

There are material opportunities for joint value creation through access to Woolworths Group’s retail capabilities and Petspiration’s specialty pet expertise. This deal aims to realise value for both companies as they utilise the combined power of their retail capabilities and platforms. These can be expanded to include improved store networks, supply chains, commodity sourcing, E-commerce customer experience, loyalty platforms and personalisation. This will enhance operational efficiency as enhanced technology is employed, leading to a decrease in operational costs.

Oversight and management:

After the deal, founders will continue to own a majority material stake in the company. As a result, the leadership would remain the same, and allow for a more organic and smooth transition to facilitate joint value creation and improved operational efficiency. This will ensure balanced management catered to maintain the culture of both companies and remove the large cost risks that are associated with management suddenly having to take over the acquired firm’s functions.


Woolworths announced in December 2022 that it would acquire a 55% stake in Petspiration Group for $401.70 million in cash. There is limited information on the potential risks, however like any deal, it is prone to integration challenges, cultural differences and regulations.

The deal has a ‘buy rating’ from Goldman Sachs, who view the acquisition as ‘strategically aligned’ with Woolworth’s objectives. It provides strong synergies and is a step closer towards Woolworth’s “ecosystem strategy”. However, JP Morgan believed the acquisition to be a “questionable capital allocation”. GS gave it a rating of $41.7 as target price, JP Morgan gave it a $31.10.

Despite GS’s positive outlook, Woolworth’s shares have dropped to lower than pre-pandemic conditions (a 15% drop from mid-August) in Q1 of 2023. However, it is still early to write off Woolworth’s yet. With a compatibility culture fit between PETstock and Woolworths, as well as increasing demand for pet products due to a rise in pet ownership in Australia since COVID-19 lockdowns, the acquisition allows for expansions in the pet industry.

The deal is currently being approved by the ACCC and New Zealand Commerce commission approvals that will decide whether it can be proceeded through. The commission is a New Zealand government agency with “responsibility for enforcing legislation that relates to competition in the country’s markets”. The deal is expected to achieve a mid-teens internal rate of return, indicating the strong profitability this deal will yield.


After conducting a thorough analysis of the acquisition of Petspiration Group by Woolworths Group Limited, it can be concluded that this deal represents a significant move by Woolworths to expand its operations in the rapidly growing pet care industry in Australia. With the acquisition of a majority stake in PETstock Pty Ltd, Woolworths gains access to a well-established brand with a strong presence in the Australian pet care market, including services such as grooming, veterinary, day-care, adoption, and more.

The pet care industry has seen tremendous growth in recent years, driven in part by the COVID-19 pandemic and the rise in pet ownership in Australia. This trend is expected to continue, with Australians spending billions of dollars annually on their pets, overall indicating healthy growth for the foreseeable future. The acquisition of PETstock positions Woolworths to take advantage of this growing demand by expanding its offerings to include pet care services and products.

The deal structure involves Woolworths paying a combination of cash and debt assumption to acquire the majority stake in PETstock, with the transaction expected to close in mid-2023. While the industry outlook is positive, the acquisition is not without risks. Woolworths will need to navigate a highly competitive market and manage the integration of PETstock into its existing operations.

Overall, the acquisition of PETstock represents a strategic move by Woolworths to expand its business into a growing industry with strong potential for future growth. The success of the acquisition will depend on Woolworths' ability to effectively integrate PETstock into its operations and capitalise on the opportunities presented by the pet care industry.


  1. Buelva, A. (2022). National survey reveals Australians spending on pets | [online] Available at: national-survey-reveals-australians-spending-on-pets [Accessed 27 Apr. 2023].

  2. Commerce Commission - Wikipedia (2023). Available at: [Accessed: 19 April 2023].

  3. EBITDA Multiples Across Industries | Eqvista (2021). Available at: multiples-by-industry/ [Accessed: 19 April 2023].

  4. Grand View Research (n.d.). Veterinary Hospitals Market Size, Share & Trends Analysis Report By Type (Medicine, Surgery), By Animal Type (Companion, Farm Animals), By Sector (Private, Public), By Region (APAC, Europe), And Segment Forecasts, 2022 - 2030. [online] Grand View Research. Available at: market-report [Accessed 27 Apr. 2023].

  5. Harrison, T. (2023) Woolworths shares have fallen to pre-pandemic levels. Time to buy?, The Motley Fool Australia. Available at: fallen-to-pre-pandemic-levels-time-to-buy/ (Accessed: 19 April 2023).

  6. IBISWorld (2022). Pets and Pet Supplies Retailers in Australia - Market Size 2008–2029. [online] Available at: [Accessed 27 Apr. 2023].

  7. Mordor Intelligence (n.d.). AUSTRALIA VETERINARY HEALTHCARE MARKET - GROWTH, TRENDS, COVID-19 IMPACT, AND FORECASTS (2023 - 2028). [online] Mordor Intelligence. Available at: market-industry [Accessed 27 Apr. 2023].

  8. Petspiration valued at $1.7 billion after Woolies investment (2023). Available at: owner-for--586-million.html [Accessed: 19 April 2023].

  9. S&P Capital IQ (n.d.). PETstock Pty Ltd Private Company Profile. [online] Available at: [Accessed 27 Apr. 2023].

  10. S&P Capital IQ (n.d.). PETstock Pty Ltd Transaction Details > Merger/Acquisition. [online] Available at: 4&transactionid=1818675266 [Accessed 27 Apr. 2023].

  11. S&P Capital IQ (n.d.). Woolworths Group Limited (ASX:WOW) Public Company Profile. [online] Available at: [Accessed 27 Apr. 2023].

  12. Sun, K. (2022) Woolworths set to become the pet retailing king: Brokers opinions split, Market Index. Available at: opinions-split [Accessed: April 19, 2023].

  13. Woolworths barks up a new tree, splashes $586m on PETstock owner (2022). Available at: 20221215-p5c6ki [Accessed: 19 April 2023].

  14. Available at: %20Group.pdf/ [Accessed: 19 April 2023].

  15. Woolworths makes $586m investment in PETstock owner (2023). Available at: woolworths-20221215-p5c6ju.html [Accessed: 19 April 2023].

  16. Woolworths to take 55% stake in pet food retailer Petspiration for $401 mln, Reuters. Thomson Reuters. Available at: food-retailer-petspiration-401-mln-2022-12-14/ [Accessed: April 19, 2023].

The opinions expressed in the reports are those of the members of the Junior IB team and are not affiliated with any university or institution. The financial recommendations provided are for educational purposes only and the Junior IB team takes no responsibility for any losses that may occur from implementing any ideas presented in the reports. The Junior IB team is not authorized to provide investment advice. The information, opinions, and estimates presented in the reports reflect the Junior IB team's judgment at the time of publication and are subject to change without notice. The price, value, and income of any securities or financial instruments mentioned in the reports may fluctuate. The Junior IB team has no business relationship with any of the companies mentioned in the reports and does not receive any compensation for their inclusion.

Copyright © June 2023 | The Junior IB.


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