British catering firm Compass Group has agreed to buy rival CH&CO for an initial enterprise value of £475 million (€553.6 million) in a bid to grow its UK and Ireland business.
CH&CO, which caters to sectors including businesses, sports and universities, is one of the royal warrant holders for catering services, according to its website.
Some of the iconic and landmark venues it caters to include the Royal Opera House and Abbey Road Studios.
"With CH&CO's strong brand identity and a broad geographic reach, we would be able to further enhance our customer proposition, helping us capitalise on the significant growth potential in the market," Compass CEO Dominic Blakemore said in a statement.
There is an additional earn-out over two years after the deal closes, depending on the profit growth of the business, Compass said.
Reading-based CH&CO has more than 900 clients across 1,000 locations and currently generates annual revenue of about £450 million.
A 'Huge Potential'
Bill Toner, CEO of CH&CO, added, “The prospect of joining a leading global provider of food services offers huge potential for us and our clients. Creativity and innovation are skills that we share with Compass and food is at the heart of everything we do.”
“Both businesses have strong and complementary brands, and subject to regulatory approval, there is a great opportunity for us to learn from each other and to build an even more exciting future together.”
Compass is the world's largest catering group, with operation in more than 30 countries across the globe.
'We can imagine potentially stronger margin dynamics in FY23 and we would expect clear synergy upside following integration with Compass,' Barclays analysts wrote in a note.
'There has been a bit of a drag to EPS forecasting not knowing how cash will be spent this year so the announcement of this deal will help to provide some clarity,' they said.
In November of last year, Compass Group said it expects 2024 underlying operating profit to grow about 13%, aided by strong demand leading to high single-digit organic revenue growth and stronger margins.
News by Reuters, additional reporting by ESM.
