Masterpet good company for Ebos
On the face of it, it seemed an unlikely marriage: a petfood manufacturer and a distributor of healthcare products. But there appear to be good reasons why, just before Christmas, Petone-based Masterpet was snapped up by well-heeled Christchurch distribution firm Ebos for $105 million.
The sale was the end of an era for Masterpet's main owners, Brent Wootton and private equity firm Active Equities.
Wootton, a quarter stakeholder and former chief executive, said selling the family business was a joint decision with his partners, who were getting on in years.
There were "a few tears shed" but he was confident the deal would be good for Masterpet.
"We've been approached numerous times by people who I would never have voted to sell [to], like foreigners or money men that didn't get our business, and the people and the customers. So Ebos really were a fantastic fit.
"They've got a track record of being a very good ethical company. I knew my people were secure and that my customers would in fact benefit from the skills that company could bring.
"I think anyone who's realistic in business realises they should be growing their business above their capabilities and I felt it was probably that time for me too."
Wootton will continue to have a hand in the firm which was founded by his father, HJ Wootton, in 1961, after he bought an import warehouse for pet supplies. The company now distributes leading brands like Iams and Eukanuba, as well as its own Vitapet and other brands, and owns a half-stake in Animates, a chain of 20 pet stores.
Ebos' managing director, Mark Waller, said Brent Wootton wanted the firm to stay in Kiwi hands. "He's a very Wellington-centric guy and he's fiercely proud of it being a New Zealand success story, so he wanted to make that it stayed here."
Waller suspects this is part of the reason why Masterpet did not list on the sharemarket as many pundits expected.
The other major reason seemed to be market conditions, which had "just basically turned to custard following the whole credit crunch".
"They didn't really think that the timing was right for new listings like that."
FOR EBOS, which is listed, the benefits of buying Masterpet are several-fold.
Diversifying into the fast-growing petcare market will help Ebos reduce its reliance on the state-controlled healthcare budget.
And Masterpet is expected to be a healthy contributor to Ebos' coffers. The company is projected to add $170m in revenue and $20m in ebitda to the group in its 2013 year, including the Animates pet store business.
Waller also believes there's room for Masterpet to expand, particularly in the veterinary space.
"At the moment the core products are petfood, all sorts of accessory products, basically the sort of things you'd see in Animates.
"They do very, very little in the way of animal pharmaceuticals, which is obviously a strength of Ebos' in the pharmaceutical world. They don't do any vet wholesaling at all ... which is a category that we know reasonably well.
"Ebos has sales and marketing experience, we have grocery experience, we have channel management experience, we have wholesale, pre-wholesale, we have similar IT and logistics systems.
"So there's lots of areas where the core competencies are virtually identical."
Waller said there was also a "sweet irony" in the deal's Brierley connection. Active Equities is run by two former Brierley executives and Ebos was once majority-owned by Brierley.
John Cairns, Forsyth Barr's associate director of research, said Ebos was a "pure logistics" business which took a great leap forward after the successful acquisition of Propharma, a distributor of prescription medicines.
"A lot of the businesses that they run operate on very low margins and it's a reflection of their efficiency in distributing products through these various channels."
Cairns said it was hard to judge whether Ebos paid a fair price because of confidentiality clauses between vendor and buyer.
But the deal appeared to be a solid one – albeit one that incurred some of Masterpet's debt.
"My feeling is, it [Ebos] is a good business and I think you've got to put it into context that the Ebos guys have been particularly adept at creating value from acquisitions.
"They are very good at it."
The good news for Masterpet's 300 employees is that Ebos will leave the staffing untouched, including the Sydney-based chief executive Sean Duggan.
"Our focus is on growing the Masterpet business, not taking costs out," Waller said.
The Dominion Post