The Woolworths Group Ltd (ASX: WOW) share price is pushing higher on Thursday.
In morning trade, the retail giant's shares are up 1% to $34.72.
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Why is the Woolworths share price rising?
Investors have been bidding the Woolworths share price higher today in response to news that the company has made a major new acquisition.
According to the release, a day after selling down its stake in Endeavour Group Ltd (ASX: EDV), Woolworths has put the proceeds to work by acquiring a 55% stake in Petspiration Group.
Petspiration Group is a leading Australian and New Zealand speciality pet food, accessories, and services retailer and the name behind the PETstock and Pet.co.nz brands.
Woolworths has paid a total of $586 million in cash for the stake, which represents an 11x EBITDA acquisition multiple. Based on this acquisition price, management expects the transaction to deliver strong returns for shareholders with an internal rate of return in the mid-teens.
It has advised that the founders of Petspiration will continue in leadership roles and together with existing shareholders will retain a 45% interest.
'Material value creation' opportunities
Woolworths' CEO, Brad Banducci, was delighted to have acquired a stake in Petspiration and sees material value creation opportunities. He commented:
Specialty pet is a large and growing retail segment in which we have limited presence. We are delighted to be investing alongside founders, Shane and David Young, in Petspiration, the number two player in the segment.
Specialty pet is a logical adjacency given the high penetration of pet ownership across Australia and New Zealand. The partnership will allow us to meet more of our customers' pet family needs with a complementary range of specialty pet products and services, strengthen the Everyday Rewards loyalty program and unlock opportunities for material value creation across both businesses.
