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Summary
- Empire to acquire 51 per cent stake in Longo’s, based on US$700-million valuation.
- The deal has choices to expand up to 100 per cent ownership of the company over time.
- Longo’s to use Empire's sourcing and logistics capabilities to bolster the business.
Canadian conglomerate Empire Company Limited (TSX:EMP) is eyeing to consolidate its presence in southwestern Ontario, one of Canada’s largest grocery markets, after acquiring a majority stake in the family-owned retail chain Longo’s and Grocery Gateway for US$357 million.
Empire has signed a deal to buy a 51 per cent stake in the Ontario-based e-commerce company, which it says will add significant value as it reinforces its grocery retail operations in the province. Empire already owns well-known brands like Farm Boy, Foodland, FreshCo, Sobeys, and Voilà.
Announcing the latest acquisition on Tuesday, Empire CEO Michael Medline said that Longo’s values align with the company, which will complement Empire’s growing e-commerce business. He described Longo's as the crown jewel of grocery that will drive its future sales. Empire's successful acquisition of Farm Boy had set the stage for foraying into Longo's and Grocery Gateway businesses.
The purchase would also bring along Longo’s 70,000 customers to its fold as it continues to add new subscribers to its growing list of patrons. Mr. Michael said that customers will continue to enjoy their experience with Longo’s while unlocking new benefits.
Pic Credit: Pixabay.
Partnership to Bolster Expansion
Longo's, on the other hand, plans to open several new stores over the next five years. Company President and CEO Anthony Longo welcomed their new collaboration with Empire and said that the strong value alignment of the two companies will give a boost to the business. Their new partnership will continue to offer high-quality products and services built upon by Longo’s, he added.
While the Grocery Gateway will continue to operate as a stand-alone business, the collaboration will allow Longo’s to utilize Empire's capabilities in infrastructure, real estate, sourcing, and logistics, as well as take advantage of its fast-growing Voilà online business.
Founded in 1956, Longo's retail chain has grown to 36 locations in the Greater Toronto Area (GTA), with 10 new stores added in the last five years and the Grocery Gateway e-commerce business.
Longo’s logged annual sales worth US$1.1 billion as of February 28, 2021. Besides, fresh-and-high-quality products, Longo’s also sells a variety of ready-made food items under various labels.
Empire’s 51 per cent stake, which is based on Longo's current value of US$700 million, is expandable up to 100 per cent ownership over time, according to the company.
Empire stocks (TSX: EMP.A) were trading at C$38.13 apiece at 1.44 pm ET on Tuesday.
