Marks and Spencer Group PLC (LSE:MKS) said it is buying Gist Ltd, its principal contract logistics provider, for an initial £145mln from BOC Group subsidiary Storeshield.
The acquisition is expected to be EPS accretive in the next year and accelerates the retailer’s plan to modernise its food supply chain network to support growth.
The seller with receive a further £85mln plus interest from the proceeds of the onward disposal of freehold properties. An additional profit share from the disposal proceeds of up to £25mln plus interest will be payable under certain conditions.
M&S said it can retain the freehold properties should it wish to do so. If it does, the full amount of £110mln plus interest will be payable.
Gist provides the majority of M&S Food logistics services via a network of eight primary and 10 secondary distribution centres located across the UK and Ireland.
The existing arrangement with Gist ties M&S to a higher cost legacy contract which expires in 2027, and the group said the acquisition will generate immediate benefits through the elimination of contractual fees and costs.
The acquisition also means M&S can take control of and invest in the network, building on the successful implementation of the ‘Vangarde’ supply chain optimisation programme.
"The last two years have shown what can be achieved by working collaboratively alongside our partners at Gist,” said M&S CEO Stuart Machin.
“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."
Gist had proforma EBITDA of £55mln in the year to end-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.
Gist has around 5,800 employees. Its CEO Michael Chambers will continue to lead the business and report to the commercial director of M&S Food.