By Stuart Condie


SYDNEY--Australian supermarket operator Woolworths Group Ltd. will take a 55% stake in regional pet-product retailer Petspiration, diverting capital from its longstanding interest in alcoholic drinks retail.

Woolworths on Thursday said that it had agreed to pay 586 million Australian dollars (US$402.2 million) in cash for the stake in Petspiration, which operates 276 stores in Australia and New Zealand. The deal will be funded with proceeds from its recent sale of a 5.5% stake in ASX-listed Endeavour Group Ltd., which Woolworths demerged in 2021.

"Specialty pet is a large and growing retail segment in which we have limited presence. Specialty pet is a logical adjacency given the high penetration of pet ownership across Australia and New Zealand," Woolworths Chief Executive Brad Banducci said.

The acquisition would also strengthen Woolworths' loyalty program and unlock opportunities for material value creation across both businesses, Mr. Banducci said. Petspiration has 2.4 million loyalty club members and its own retail brands.

The founders of privately owned Petspiration will continue to run the business, which will operate as a standalone unit. They will hold 45% of the business in conjunction with existing shareholders.

Woolworths said the acquisition implied an enterprise value for Petspiration of A$1.7 billion, or 11 times 12-month earnings before interest, tax, depreciation and amortization at September 2022.


Write to Stuart Condie at stuart.condie@wsj.com


(END) Dow Jones Newswires

12-14-22 1818ET