Food in the Express delivery supply chain. This week (July 21st) M&S announced the acquisition of long-term food logistics partner GIST (pronounced Gist as in Logistics) as they accelerate their supply chain transformation and reposition for growth. Gist has been a proud partner of M&S since 1932 and in recent years built an even stronger working relationship together. This weeks acquisition will allow M&S to take full control of food supply chain for the very first time and, in turn, drive better availability for customers.
Marks and Spencer Group plc announces (July 21st) 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.
