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RNS Number : 2825T
Marks and Spencer Group PLC
21 July 2022
Marks and Spencer to acquire Gist as part of accelerating its
Food supply chain transformation
Marks and Spencer Group plc today announces the acquisition of
Gist Limited ("Gist"), the principal contract logistics provider to
M&S Food, from Storeshield Limited, a subsidiary of The BOC
Group Limited. The acquisition is expected to be EPS accretive in
the next year and accelerates M&S's multi-year plan to
modernise its Food supply chain network to support growth.
M&S Food has restored an industry-leading position in volume
growth over the past four years, developed bigger, better stores
and entered new channels through the investment in Ocado Retail and
through franchise partnerships, including over 2,500 Costa stores.
However, there is a substantial opportunity to create a more
efficient and effective supply chain through investment in the
network to reduce the cost to serve, update legacy systems and
improve automation.
Gist provides the majority of M&S Food logistics services
via a network of 8 primary and 10 secondary distribution centres
located across the UK and the Republic of Ireland, including a
number of freehold warehouses. As previously highlighted the
existing arrangement has a higher cost legacy contract which
expires in 2027. The acquisition will generate immediate benefits
to M&S through the elimination of contractual fees and costs
and the implementation of aligned operational processes. Through
acquiring Gist, M&S can also take control of and invest in the
network, building on the successful implementation of the
"Vangarde" supply chain optimisation programme.
Under the transaction, M&S is acquiring the entire share
capital of Gist for an initial consideration of GBP145m in cash. A
further amount of GBP85m plus interest will be payable in cash from
the proceeds of the intended onward disposal of freehold properties
or, at the latest, on the third anniversary of completion. An
additional profit share from the disposal proceeds of up to GBP25m
plus interest will be payable under certain conditions. M&S has
the ability to retain the freehold properties should it wish to do
so in which case the full amount of GBP110m plus interest will be
payable.
The Gist business being acquired generated a proforma EBITDA of
c.GBP55m in the year ended December 2021, with the majority of
profit reflecting management fees recharged to M&S under
contractual arrangements, which will be eliminated upon
consolidation to M&S. The transaction is expected to be
earnings enhancing in its first full year and will be funded
through existing cash reserves.
Stuart Machin, Chief Executive, said : "M&S has been tied to
a higher cost legacy contract, limiting both our incentive to
invest and our growth. The last two years have shown what can be
achieved by working collaboratively alongside our partners at Gist.
This has given me confidence that now is the time to take action
and remove an impediment to our growth. We have therefore acted
decisively to acquire Gist, taking control of our Food supply chain
for the first time in our history. This is the first step in a
multi-year plan which will transform the entire supply chain."
About Gist
Gist is a time-sensitive, temperature-controlled contract
logistics business, offering customers primary logistics (from
supplier to depot) and secondary logistics services (from depot to
store). It has worked with M&S as its principal customer for
decades and provides the majority of M&S Food logistics
services under a long-term contract via a network of 8 primary and
10 secondary distribution centres located across the UK and the
Republic of Ireland, including a number of freehold warehouses. It
also provides a limited number of logistics services for third
parties as well as freight forwarding for BOC. Gist's food service
division will remain with BOC post completion with appropriate
transitional service agreements in place to ensure business
continuity.
Gist has an overall employee base of approximately 5,800, led by
an experienced management team, including CEO Michael Chambers who
will continue to lead the business and report to the Commercial
Director of M&S Food.
Additional information
The acquisition of Gist constitutes a Class 2 transaction for
M&S under the UK Financial Conduct Authority's Listing Rules.
For the purposes of LR 10.4.1 R, the Gist business being acquired
had gross assets of approximately GBP305.7m as at 31 December 2021
(this number includes GBP51.4m of cash that is not being acquired
by M&S as part of the transaction) and generated a proforma
EBITDA of c.GBP55m for the year ended 31 December 2021.
Completion of the proposed acquisition is conditional on the
separation of certain businesses from Gist which do not form part
of the target business and certain merger control approvals and is
expected to take place in H2 of calendar year 2022.
F or further information, please contact:
Investor Relations:
Fraser Ramzan: +44 (0) 7554 227758
Jack Cook: +44 (0) 20 3882 5535
Media enquiries:
Corporate Press Office: +44 (0) 20 8718 1919
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the UK version of the Market Abuse Regulation (EU) No. 596/2014 as
it forms part of UK law by virtue of the European Union
(Withdrawal) Act 2018. Upon the publication of this announcement,
this inside information is now considered to be in the public
domain.
Ends-
Statements made in this announcement that look forward in time
or that express management's beliefs, expectations or estimates
regarding future occurrences and prospects are "forward-looking
statements" within the meaning of the United States federal
securities laws. These forward-looking statements reflect M&S's
current expectations concerning future events and actual results
may differ materially from current expectations or historical
results. Any forward-looking statements are subject to various
risks and uncertainties, including, but not limited to, failure by
M&S to predict accurately customer preferences; decline in the
demand for products offered by M&S; competitive influences;
changes in levels of store traffic or consumer spending habits;
effectiveness of M&S's brand awareness and marketing
programmes; general economic conditions including, but not limited
to, those related to the Covid-19 pandemic or a downturn in the
retail or financial services industries; acts of war or terrorism
worldwide; work stoppages, slowdowns or strikes; and changes in
financial and equity markets. For further information regarding
risks to M&S's business, please consult the risk management
section of the 2022 Annual Report (pages 47-57).
The forward-looking statements contained in this announcement
speak only as of the date of this announcement, and M&S does
not undertake to update any forward-looking statement to reflect
events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
No statement in this announcement in intended or should be
interpreted to mean that earnings or earnings per share for the
current or future years will necessarily match or exceed the
historical published earnings or earnings per share for
M&S.
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