Swedish retailer Axfood has reached an agreement with Bergendahl & Son AB (Bergendahls) to acquire 100% of Bergendahl Food AB (Bergendahl Wholesale) through Dagab Inköp & Logistik AB (Dagab).
The acquisition will allow the retailer to strengthen its presence in the Swedish food retail market and result in economies of scale, cost synergies, and increased competitiveness.
Axfood also acquired a minority stake of 9.9% in City Gross Sverige AB as part of a strategic partnership to strengthen City Gross’ market position.
The partnership also offers Axfood the option to acquire an equity stake of up to 30% in City Gross, gradually in five years.
President and CEO of Axfood, Klas Balkow, said, "We are delighted to have reached this agreement with Bergendahls, which, similarly to Axfood, has a long-term and value-based business perspective. There is a clear industrial rationale to this transaction that creates conditions for strengthening the competitiveness of both our and Bergendahls’ wholesale customers.
"On the retail side, I am impressed with City Gross’ recent progress, and am convinced that we through this partnership can strengthen City Gross’ market position within the hypermarket segment, a segment in which Axfood is currently not present."
Delivery Agreement
Dagab and City Gross have also signed a 15-year delivery agreement that includes cooperation around assortment and IT infrastructure, among others.
The transaction will generate annual cost synergies of approximately SEK200 million, to be realised successively up to 2025, the company added.
Excluding integration and transaction costs, the acquisition is expected to be accretive to Axfood’s earnings per share from 2022.
Commenting on the transaction, Lars Ljungälv, president and CEO of Bergendahl & Son AB, said, "This deal creates opportunities to expand City Gross and strengthen our market position, which is a long-term goal and a significant part of Bergendahls’ strategy.
"Axfood is the right partner for City Gross going forward, and we very much look forward to the development of our hypermarket concept. Wholesale customers will also be well taken care of, as Axfood is at the forefront in terms of the future of logistics."
The partnership will give Axfood exposure to the hypermarket segment of the Swedish food retail sector, thereby increasing the group’s presence and reach.
The deal is subject to approval by the Swedish Competition Authority, and is expected to close no earlier than 1 September 2021.
Impact Of Partnership
The partnership with Axfood will strengthen City Gross’ competitiveness and create conditions for developing the format and increasing market share within the hypermarket segment, which will also benefit the customers of City Gross.
Bergendahl Wholesale employs approximately 800 people and is the main supplier to City Gross. It also caters to approximately 170 independent retailers and online retailers.
City Gross, which includes City Gross and Hyllinge Cash banners, is a Swedish food retail chain with a market share of approximately 4%.
Currently, it employs about 2,800 people and operates a network of 42 stores.
