Empire buys 51 per cent stake in specialty grocer Longo’s for $357 million
Posted Mar 16, 2021 03:07:27 PM.
This article is more than 5 years old.
STELLARTON, N.S. — Empire Company Ltd. has agreed to buy a majority stake in supermarket chain Longo’s and its Grocery Gateway e-commerce business in a deal that further consolidates Canada’s grocery retail landscape.
The Sobeys parent company said Tuesday the $357-million deal adds two high-quality banners to its business, expanding its reach in the lucrative southwestern Ontario market and building on its recent acquisition of Farm Boy.
Empire CEO Michael Medline said Longo’s will be managed separately and that Empire will not “change or spoil” the specialty grocer.
“This model of keeping the brand separate has been extremely successful with Farm Boy and we believe it is imperative to do the same with Longo’s,” he said during an investor call.
“The partnership with Longo’s accelerates Empire’s growing presence in Ontario and more specifically the Greater Toronto Area — Canada’s largest and fastest-growing grocery market.”
Longo’s has 36 locations in the Toronto area, while Grocery Gateway serves 70,000 customers.
Under the deal, Longo’s and Grocery Gateway will continue to be led by CEO Anthony Longo.
“We are a strong competitor in southern Ontario’s hypercompetitive grocery market and we’re still a family business,” Longo said during the investor call, noting that three generations of Longo’s work in the business.
“The success of the Farm Boy acquisition gave me and my leadership team the confidence that Empire will meaningfully invest in our growth.”
The acquisition builds on Empire’s long-standing banners in Ontario including Foodland and FreshCo and 2018 acquisition of Farm Boy.
The Stellarton, N.S., based grocery giant also operates Safeway, IGA and Thrifty Foods.
Michael Vels, Empire’s chief financial officer, said future expansion of the company’s store network will be based on market conditions such as demographics.
“All of our banners are going to obviously compete for capital,” he said during a conference call. “We’re going to make the right financial decision for all the businesses.”
Decisions on new stores will be made “on the basis of the right fit in the right market,” Vels added.
Empire said Longo’s will be able to benefit from its infrastructure and capabilities, in areas such as sourcing, logistics and real estate.
The Longo’s deal, which will see Empire acquire a 51 per cent stake based on an enterprise value of $700 million, is expected to close in the first quarter of Empire’s 2022 financial year.
The acquisition is subject to customary closing conditions.
This report by The Canadian Press was first published March 16, 2021.
Companies in this story: (TSX:EMP.A)
The Canadian Press
