REG - Marks and Spencer Gp - M&S to acquire Gist Limited

Marks and SpencerAnnouncement

21/07/2022 09:00

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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 £145m in cash. A further amount of £85m 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
£25m 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 £110m plus interest will be payable.

The Gist business being acquired generated a proforma EBITDA of c.£55m 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
£305.7m as at 31 December 2021 (this number includes £51.4m of cash that is
not being acquired by M&S as part of the transaction) and generated a
proforma EBITDA of c.£55m 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.

For 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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