Woolworths has announced a majority stake in Petspiration Group for $586 million, at an EV/EBITDA of 11x. This is a full price, particularly given Woolworths will deliver the majority of the synergies. We are concerned that industry-wide revenue may recede given the COVID-19 pet boom added more than 2.5m dogs and cats to households. Woolworths is building out its “ecosystem” and Petspiration is a natural extension. However, the more important share price driver is Australian Food, which needs to demonstrate that previous capex is delivering a return on investment.

Coles has announced the sale of its Fuel & Convenience business to Viva Energy. The company emphasises its desire to focus on its “omni-channel” supermarkets and liquor businesses, as well as become Australia’s most “sustainable” supermarket. The deal is mildly EPS accretive and a decent price for Coles. On our estimates the sale price is 12x EV/EBIT (FY23e) and 0.6% EPS accretive in FY24e. We do see some downside risks over time as Coles may lose the grocery wholesaling business and the cost of fuel discounts may rise.

Woolworths has made a bid for API, trumping Wesfarmers takeover offer. This battle has just begun. Both companies have the balance sheet. Both see improvements in Priceline’s sales and earnings. Wesfarmers is likely to place a greater value on both the Priceline loyalty members and the platform API may create for a Health division in our view.

Treasury Wines has announced the acquisition of Frank Family Vineyards for A$432 million and is funded with debt. The US luxury chardonnay brand is a good fit for Treasury Wines and earnings could easily triple on a four-year horizon.  Treasury Americas targets 25% EBITS margins, up from last year’s 16%. Acquiring Franks Family Vineyards adds 170bp alone. While a good deal, it is small. Perhaps more luxury wine brand acquisitions are ahead.

Wesfarmers has increased its bid for API to $1.55 per share, a 12% lift in its offer price. The API Board has indicated support. While the enterprise value is less than $1 billion, it is an important development for Wesfarmers as it establishes a Health segment. More acquisitions may follow. API is also likely to be part of Wesfarmers digital ecosystem over time.