Thank you for standing by, and welcome to the Metcash Announcement of Acquisitions and Equity Raising Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to have the conference over to Mr. Doug Jones, CEO. Please go ahead.
Thanks very much, and good morning, everybody. This is Doug Jones, the CEO of Metcash. I'm really excited to be sharing some interesting transactions with you this morning. You would have had our ASX release and the slides, and I'm sure you would have studied those. I'm gonna make a few opening comments. I'm gonna point you to a few highlights. I'll try and keep going by pointing out which slide I'm referring to, and then, of course, the opportunity for some questions. So by way of introduction on slide seven, these are three very exciting transactions for us today at Metcash. They represent a significant milestone in our company's history.
They continue the transformation, towards being a, a bigger, a more resilient, more, stronger business with, with much better growth prospects, and they have the, potential to step change that trajectory. In summary, these are all on-strategy acquisitions, and they're compelling. We're buying them well. They're conservatively funded, and we believe they offer great synergies that we have got a high confidence in extracting .
At Metcash, we've got the track record, and the experience and the capability to handle these. We know all three of these companies well. We've done an enormous amount of diligence on them, and that's allowed us not only to value them but to prepare to extract those synergies. And we believe that presents a wonderful opportunity, to create value for our shareholders. Superior Foods is a large national distributor to the food service industry. It now...
It means that, Metcash is now the largest supplier of food and liquor to all independent businesses across Australia. Bianco Construction Supplies is a South Australia-based supplier of construction and industrial products to the South Australia and Northern Territory markets. And Alpine Truss is one of the country's largest frame and truss operators based in Victoria. And both of these hardware transactions further our Whole-of-House Strategy, which allows us to establish a relationship with our builder customers at the start of the project and therefore capture a larger share of those, their total spend.
I do want to point out and remind you of our purpose, which is championing successful independents in support of thriving communities. These transactions are well aligned with this purpose. I'll describe this, I describe it as we know independents, and we know them well. It's what we do. That's not just cultural, but from an operating model and a supply chain perspective as well. As you know, I'm on record saying that independent businesses play an enormous role in society. They make a huge contribution to the economy and to the communities they serve. Superior improves our offer to our existing independent retailers.
It makes our food business fundamentally better. It improves the offer to our independent retailers in range, scale, and capability. It's good for our customers, and it's good for Superior's customers. Metcash improves Superior's offers to their customers, both national and local. And the addition of the Bianco and Alpine to the IHG network brings a broader range of products for our existing members to offer their customers and closes out a few gaps in our offering to the independents and all their customers.
These transactions add volume to our networks, and as you know, through our flywheel, this is a key value driver at the heart of our operating model. In addition to compelling strategic and operational alignments, they're economically attractive. They are EPS and margin accretive, and they offer material synergy opportunities which we've got a high confidence in realizing, and they be concluded at attractive multiples, as I'll discuss in a few minutes.
Finally, of course, we're also announcing this morning an equity raise, AUD 300 million pro rata institutional placement, and up to AUD 25 million share purchase plan, which together with existing debt and cash, will be used to fund the acquisitions. Turning now to slide 11. You've heard me talk about the transformation of Metcash, and I just want to talk about that a little bit more, explain what I mean. So in recent years, Metcash has been transforming itself from primarily what you would call an old-fashioned food and wholesale liquor wholesaler, to an integrated wholesaler, banner operator, and retailer with sustainable business models, clearly improved operations, and transformed retail networks in with healthy market positions.
You also know that between food and hardware, these businesses make up roughly 80% of our EBIT, and they contribute about the same amount to that. The transformation in food has been underpinned by the refocus on retailer sustainability, and alongside that, an investment by retailers in their stores and their offerings. This is supported by material improvements in the compliance to drive supplier reinvestment, and we enjoyed strong support from our suppliers. All of this together has transformed the food and liquor networks in terms of quality, relevance, and competitiveness.
And of course, this means resilience and sustainability, too. In hardware, the addition of first, Home Timber and Hardware and then Total Tools, together with IHG's organic growth and continued consolidation of the fragmented market, has underpinned growth in the hardware pillar and the transformation in the group. I've noted the Metcash flywheel and how each of these transactions supports and is supported by each layer.
In addition, I want to point you to Metcash's strong record of successful integration and synergy extraction. This conviction and high belief is underpinned by the fact that we have a number of replicable strategies or playbooks, you might call them. And examples include the success in entering complementary markets through Total Tools, as well as IHG's proven track record of value creation, acting as a natural consolidator in a highly fragmented market. We have experienced and capable management and leadership teams.
You will have noted recent changes, and these reflect the investment that we've made in our capability and experience, and this is what gives us confidence, not just at the executive level, but throughout the teams. We've also got a strong track record of disciplined capital deployment and synergy realization, and I want to give you some examples here. When we bought Home Timber and Hardware, we committed to targeted synergies of AUD 50 million and delivered more than AUD 20 million.
Of course, with Total Tools, where we've committed to AUD 5 million of synergies, we delivered AUD 7.5 million, but much more importantly, from a growth and EBIT returns basis, which was made possible within Metcash and IHG through the structure of fair operational support, sensible governance, and healthy capital deployment. Turning now to slide 15, I want to give some more of the detail on the acquisitions. As I've said already, there's a compelling logic to the acquisition of Superior Foods into the Metcash Group.
It's a quality food service business of national scale. It's complementary to our existing food business, and it makes that a stronger and more resilient business. It operates in an attractive market with logical adjacent categories and customers. It's really interesting to think about how the businesses intersect with one another today. Our physical networks match up very well. We buy from roughly the same suppliers, and we often serve the same customers, but we don't actually compete. Of course, the acquisition of food service immediately scaled our own food service business within Campbells.
You'll know that we have a small but healthy food service business in Campbells, and this transaction takes us to scale overnight and provides a platform for continued growth. The Bianco and Alpine are perfectly aligned with the IHG strategy. To use a well-worn phrase, we're very much down the fairway. Continuation of the strategy to sensibly consolidate the highly fragmented building supplies market. They replicate on a larger and more impactful scale, strategies and acquisition steps that we've done successfully a number of times already. They accelerate the growth and market share gains in the building supply market. These three transactions are strategically and financially accretive to the Metcash Group and make us a more diverse, resilient, and growth-focused business. Turning now to slide 17 for some more detail on Superior.
I think I've already said it, this is a business that finds its natural home in our group. As many of you know, we followed this asset for a while, and we know it well. We conducted thorough and extensive diligence on it. We understand the risks and opportunities well. We've had a good period of exclusivity to round out that work. We carefully assessed what and where we need to invest through this intensive diligence, and I want to give you an example.
We physically inspected assets and sites that generate more than 95% of the revenue of this business. We've watched its growth and scaling into a national operator carefully. The opportunity is now ripe for further growth for Superior within Metcash. Superior, with the capabilities, the market scale, and the capital necessary. Of course, not to mention areas, execution in areas like logistics, transportation, buying, and strong food and liquor supplier relationships. I want to just help you work through some of the key points on the price that we've paid for Superior.
On a full earn-out basis, which we expect will be the case by June this year, and looking backwards on a pre-synergy basis, we paid 9x EV/EBITDA , pre-AASB 16, and 8x post-AASB 16. If you include synergies offline on a pro forma basis, and they are conservative synergies, we paid 6.4x on a post-AASB 16 basis. Of course, as we look forward into FY 2025 and the substantial growth that's embedded in the business, which I'll discuss in a moment, these multiples fall even further.
In short, we're confident that this is the right time and that we've built this business in the right way. The metrics are attractive and there's great synergy potential. In addition, Superior operates in an attractive market that's expected to grow at a higher rate than the grocery market. Consumption habits continue to change with long-term trends, even adjusting for the impacts of COVID-related cycles in this sector. Superior management team is committed to remaining with Superior, are engaged, and are excited about the potential of a combined business. They bring their experience and deep customer relationships with them.
I know Craig Phillips won't mind me quoting him as saying to me on a number of occasions, that his strong view is that within Metcash, Superior has the greatest potential to fulfill its maximum value and potential. At AUD 1.3 billion of sales and AUD 40 million of underlying EBIT before synergies, Superior is a meaningful addition to our group. On a pro forma basis, the transaction adds 13.6% to the food revenue, nearly 18% to food EBIT pre-synergies, and almost 25% post synergies.
As a nationally scaled player, which is only one of three nationally scaled players, it has access to national customer contracts in the corporate food service and QSR markets... and at approximately 6% market share in the number three position, we believe this indicates a highly fragmented market and there's a significant growth pipeline available. What's really interesting for me about the market share is that the top three players have about 30% market share.
This further underpins the point about the fragmented market, and I'll read it that Superior has a significant scale advantage over the next biggest player, and that only increases with this transaction. So it means there's a large addressable market adjacent to our own, a significant wide space for further expansion and consolidation. And as I've said a few times, we have successfully executed that strategy of consolidating a highly fragmented market in IHG, and we'll use those learnings of operational support, governance, sensible integration, and capital support alongside Superior's own experiences to generate attractive growth and returns.
Heading now to slide 24. This transaction makes our core business stronger in that it creates the largest supplier of food and liquor to independent businesses in Australia, adding food service customers to retail and on-premise customers. As you know, we're already the largest supplier of food to independent supermarkets and the largest distributor of liquor to independent on-premise customers. It introduces new capabilities, new ranges, and a new level of scale to both Metcash and Superior. It introduces new customers and brings strong relationships in both directions. And it materially strengthens the route to market proposition for our suppliers.
We anticipate strong levels of support from our suppliers through this transaction. Our customers already purchase a range of food service products from a number of Superior's competitors and Superior itself, and the opportunity to provide our customers with fresh and ready-made meal solutions is clear. As you can well imagine, the customer overlap with liquor on-premise customers is very high. It's logical to assume that the vast majority of these on-premise liquor customers already purchase food from one of the players in the market.
Equally, the combined route density that results from this transaction has material opportunities for better service through more frequent and more economic delivery cycles for us and for our customers. When you think about it in the grocery sense, think more fresh, more often. And the data is clear on this here. When you increase the mix of fresh, and in fresh I include ready-to-eat and par-bake meals, which are sometimes called home meal replacements, this drives increased retail store sales through more frequent visits to bigger baskets. And finally, the opportunity in private label, where sometimes we net sell, is obvious through this transaction.
In addition to creating a stronger business serving independent food and liquor customers across Australia, this makes our existing business margins more resilient through access to range, logistics, benefits, and new customers. Getting now to slide 29. We see material value creation opportunities through Metcash's and Superior's operations, and have a high degree of confidence in realizing them successfully. We're confident because of the diligence we've done. These synergies, as you can see, are in sourcing, consolidation, logistics, performance, as well as in revenue, and are well described and detailed in the slides.
The day one focus will be on extracting these administrative synergies and the low-risk benefits for both businesses, while protecting the core operations and customer service for both. Before phase two, which will happen towards the end of the second year and will result in a deeper level of integration to realize further benefits beyond those described. As noted, we confidently project AUD 13 million of run- rate synergies available and achieved by the end of the second year before this second deeper integration phase. So in summary, this is an exciting, accretive, and logical acquisition.
This supports and makes our existing business stronger and provides for opportunity for material growth and real value creation for our shareholders. Turning now to the hardware acquisitions on page 31. You've heard me speaking often about the IHG whole-of-house strategy, and that's been at the core of our growth agenda for a number of years now. As I've said, when you establish a relationship with a builder at the frame and truss stage, it allows you to engage and serve that customer more meaningfully and expand the proportion of their total project needs. In other words, to allow us to win a greater share of their spend. Bianco and Alpine support us in their respective markets, and they both accelerate our expansion.
They expand IHG's operational and financial scale, and they fill obvious gaps in the network, both geographically and in the case of Bianco, through range. Like Superior, we know these businesses well, and we've got good relationships with the founders and leadership teams. They are high-quality businesses, they've got a strong track record, and they've got experienced management teams, both of whom are committed to remain with their respective operations. Both acquisitions are immediately EPS and margin accretive on a pre-synergy basis, and we see healthy synergy opportunities.
IHG has got a great and strong track record of creating value through consolidation in this way. I'd say this is a well-trodden path of governance, operational support, sensible integration, and cross-selling to one another's customers. We see opportunities for over AUD 5 million of synergies on a run- rate basis by the end of year two, and we've got high conviction in those numbers. I turn to slide 32 and talk about Bianco.
Bianco Construction Supplies is well known and is highly regarded in the market. The brand is strong and we'll be maintaining it. It serves the South Australia and Northern Territory markets and has done so for more than 40 years from 10 locations. Included in those 10 locations is a frame and truss plant in Adelaide. As you know, we like frame and truss plants, strategically and financially. Bianco specializes in the sale and distribution of building materials to builders, concreters, bricklayers, and landscapers. What's noteworthy is the addition to the IHG range of new categories like reinforced mesh, concrete slab, hardware, structural steel, and sand and soil.
Revenue in this business for the last twelve months to October was AUD 140 million, and underlying EBIT pre- synergies was AUD 13 million. We expect synergies of AUD 2.4 million by the end of year two. Let's turn to Alpine on slide 33. This is a Victoria-based frame and truss operation, one of the country's largest. It's a 35,000 square meter facility in Wangaratta, Victoria, and from there it serves the Victorian and Southern New South Wales concentrate, from small to large volume builders. For twelve months to October last year, sales were AUD 36 million and an underlying EBIT of AUD 10.5 million, almost 22% EBIT margins.
As you know, Frame and Truss is a key strategy for us, and these two transactions expand our Frame and Truss total numbers to 24 in the network, 12 of which are co-owned or owned by us. In Alpine, we expect AUD 2.7 million synergies on a run-rate basis by the end of year two. Both hardware acquisitions, as I've said repeatedly, are in line with our current strategy. As I've said, we've got a great track record here. These are just larger in scale and impact.
My honest assessment is that the hardware acquisitions are about as aligned to proven strategy as it's possible to be. We're genuinely delighted to bring these into the fold, and we're very confident to find high-quality assets at extremely attractive multiples. Turning now to slide 36. I know you'll be interested in how we're going to operate and report off the settlements of these transactions. We've got good experience in growing, in taking, growing businesses, extracting synergies, and accelerating their growth, and we've gained it over a number of years.
As I noted, in Superior, our focus will be on simultaneously nurturing our core business and share and extracting synergies in a deliberate and well-planned way. It's really important to me that we maintain our high service levels to our customers. Superior will continue to be run by Craig Phillips, the founder and CEO, and his management team. Craig will report to me. Superior will form part of the food pillar alongside Metcash Food, run by Grant Ramage .
Our new CFO, Deepa Sita , Grant, Craig, and myself will form the board of Superior, and we will be responsible for ongoing operations and performance, governance, and synergy extraction. From a financial reporting point of view, we'll follow a model similar to that used for Total Tools, and we'll share key data, including sales and EBIT, for Superior within the food pillar numbers. Bianco and Alpine will be included into IHG, which is run by Annette Welsh . IHG, together with Total Tools, run by Richard Murray, who joined us just a few days ago, will make up the hardware pillar. The board and I are confident that this structure brings the best balance between operating entity focus and group value extraction to deliver optimal shareholder returns.
Turning now to slide 39. There's an allocation defining this through a mix of debt and equity. You talked earlier about the leverage after these transactions. I do want to say a couple of things about that. When you look at our debt leverage ratio on a pro forma basis, we indicated that it'll be just below 1.2x. But you need to be careful when you use that. That's using the October balance sheet, the last published balance sheet. We did tell you when we released our half year results in December, that we'd invested a further AUD 100 million in Total Tools for the 15% we didn't already own, and AUD 43 million for the JV resets and acquisitions.
So we've also reminded you in the past that our average debt levels are about AUD 200 million higher than in that reporting period's balance, and the peak levels are a further AUD 200 million higher. On this basis, it's logical to land at AUD 300 million to balance value creation for our shareholders, with maintaining sufficient balance sheet flexibility. So in summary, the total investment of AUD 577.5 million is made up of AUD 412.5 million for Superior Foods, on the assumption that they earn their full earn- out. AUD 82.2 million for Bianco Construction Supplies, AUD 64 million for Alpine Truss, and AUD 19 million of transaction costs.
This will be funded by AUD 300 million of equity and AUD 277.5 million of existing cash and debt. Shareholders have the opportunity to maintain their relative interest in the company through the pro rata institutional placement, while the SPP allows retail investors to apply for up to 30,000 new shares, AUD 30,000 in new shares. We estimate that more than 98% of shareholders by number, are able to apply for at least a pro rata allocation. Turning now to slide 43, the trading update. Just a few comments here. Group sales increased by 0.9%, reflecting growth in the liquor and the hardware pillars, with food on an excluding like-for-like basis flat.
Sales for the third quarter were 0.6% lower, driven by moderating inflation, particularly in food, and a shift in the Christmas and New Year holiday periods, where builders broke earlier and returned later than they did last year. Both the food and liquor pillars have continued to perform well, and their improved competitiveness and differentiated value proposition continues to serve them well. We're particularly pleased that we maintained volume growth within food.
In hardware, while demand has remained subdued in the first quarter, the business continues to perform better than the market, and we believe remains ideally placed with leading market positions to capitalize on the improvements in consumer confidence and building activity levels. Sorry. I want to conclude with a few messages. In summary, these exciting acquisitions will provide a step change in the pace of our transformation.
They accelerate our growth, and they create the opportunity for material value creation for our shareholders. Let's get it started. These are on strategy. They're logical steps in our journey. We're buying them well. We're allocating capital in alignment with our capital framework, and they offer exciting synergies that we've got great confidence in extracting. I think our great teams demonstrate that we've got a track record, the experience, and the capability to deliver on these investments, and most importantly, to create real shareholder value. With that, I'll hand back to the operator for questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. We ask today that you please limit your questions to one per person. The first question comes from Ben Gilbert of Goldman. Please go ahead.
Hi, morning, David. Congratulations. Look, from my side of things, the quality acquisitions you make sure to make. From my perspective, I'm interested in the timing side. I think obviously, Superior looks like it's been floating around for some time. Valuation, I'd argue, is, it's probably undervaluing two businesses. If you look at P/E's running sort of implied around 2x, and Coles and Woolies in the high teens, and it looks like the business is trying to. How did you sort of frame the decision around, I suppose, making these acquisitions today, particularly given, I suppose, what you'd probably have said is relatively depressed multiple for your business, and also in light of the fact that you've had a pretty good trading update today?
Yeah. Hey, Ben, thanks for the question. I'm glad that you see the strategic logic in it, and it's great that you've recognized, you know, that I think we're buying these businesses well. From a timing perspective, a couple of points. The first one is that, you know, we've said for a while that we're gonna look for value creation opportunities and opportunities to continue to transform the business and give ourselves more potential for growth on a through-the-cycle business basis.
So of course, what that means, alongside the fact that these transactions don't happen overnight, they are months in the making. We felt that we're buying great quality assets that will serve our business and our shareholders through those cycles and well into the future. Of course, we're very alive to where we are in the market cycles. I think I alluded when I spoke about Superior to the COVID-related cyclical growth in the sector.
And of course, we all know that the building sector has enjoyed a really strong period, but its demand is currently more subdued. And we factor that in when we value these businesses, and I think that's gives rise to the valuation that you've noticed. Just on Superior, you asked about the asset being made available in the past. You know, we did have a look at it in the past. We felt that the timing wasn't right then.
Interestingly, we shared some of that feedback with the business at the time, and they've spent intervening periods addressing some of those concerns. And fundamentally, they were around how settled their transactions were, and a couple of other issues. And now that we've been able to get into the detail and diligence them, we feel comfortable about the quality of business that we're gonna receive on completion.
The next question comes from Tom Kierath with Barrenjoey. Please go ahead.
Good morning, guys. Just a question on the margin commentary. Usually in the business, first half margins are a little stronger than the second half, and I've noticed that you're saying for the eight months, margins are the same as the first half. Just wanted to understand if that's just seasonally November and December is a bit higher, or has been some work done on the cost base there? Just trying to understand why the second half might be a little stronger than usual.
Hey, Tom. Thanks for the question. Yeah, I mean, I wouldn't read too much into it, into it. You know, from the first half, there's only two months, two more months, being November and December. And we're just indicating that, you know, volumes are just, top line is certainly softer, but, across the group, margins are relatively stable.
The next question comes from Craig Woolford with MST Marquee. Please go ahead.
Morning, Dave, and congrats on the acquisition. It's going to be, yeah, a step change in the opportunities for the group. Can I just clarify what the distribution center and, I guess, infrastructure you'll have in the food business? I know that Superior has 23 sites. You'll have Campbells. You're building, you know, 1 or 2 new DCs on the food side. Are all of those s taying quite separate, or are there synergies in distribution in the way the enlarged food business will be run?
Hey, Craig. Thanks. Yeah, so you're right. So we've got in Metcash today, we've got five national food and liquor distribution centers we call the mega DCs and a further eight mega DCs. And, you know, Superior has 23 sites. In phase one, we won't be integrating the supply chains of the businesses, and so they will continue to run separately. And that's really to make sure that we continue to focus on customer service as we work out the program of integration to the degree that we do so.
You have to be sensible and cautious as you do that because the operating model, while we have in Campbells a model that does do relatively small drop outbound deliveries, that is the sole focus within Superior. They also have a high degree of frozen and chilled products. So we see that there's opportunity. We haven't dimensioned the synergies. As I've said in the phase one, that's sort of a more to come for the future, and we'll be doing it sensibly. I mean, an example might be in the early periods, Craig, we could be their logical bulk storage area, freeing up some of their more high-value space to increase their capacity to serve new customers.
The next question comes from Shaun Cousins with UBS. Please go ahead.
Thanks for the morning. Maybe just a question regarding EPS accretion and synergies. I think in your comments, you highlighted that Hardware was accretive prior to synergies. We've just seen this data recently, but is the Superior Foods acquisition EPS accretive, excluding synergies, or do you need synergies to achieve the EPS accretion, please?
Hey, Sean, we've actually done all the work for you. If you go to slides 40, you'll see the, the detailed calculations, and if you go to slide 50, you'll see a simple table. On a, on a backwards-looking, before synergies, basis, on a 9x multiple, it's marginally dilutive, Superior. As I've said in my notes, as soon as you add synergies in there, it drops down, way down to 6.8x pre AASB 16 or 6.4x post. So there's a, there's, there's a marginal dilution just because of where our multiples are and the way the three structures are shared in equity.
The next question comes from Michael Simotas with Jefferies. Please go ahead.
Good morning, and I'll echo the comments about the attractive strategic rationale of these deals. Just wanted to pick up on a comment you made earlier, Doug, about when you thought about the valuations, you're sort of comfortable with accounting for where we are in the cycle in both out of home food as well as hardware. Have you structured this transaction and the price that you paid comfortable if earnings do need to fall a little bit from those bases that have been reported today? And I'll note the earn-out for the Superior Foods business suggests, I think, about 5% growth in the next 10 months or so. But just wonder if you can add any more color there, please.
Yeah. Hey, Michael. So you're right. The Superior earn-out does imply our performance, and it's, and it's I think what it comes to and implies is the confidence of Craig and his management team in achieving that. One thing I do want to point out, if you do the math on the earn-out, you'll see that it's at a much lower multiple of 7.2x and not the original multiple, which we think is fair and sensible.
The valuation of these acquisitions when you do them, I mean, I don't, you know, I don't want to teach anybody anything that they already know. You do them on as conservative basis as you possibly can, and then you go and look at our performance. So we would certainly not be comfortable with the reduction in earnings, but we value this, we value all three of them accordingly. I think what's really important to note that in all three cases, the management teams are at risk, in that they're highly incentivized to continue to deliver growth through the businesses.
Your next question comes from Bryan Raymond with JP Morgan. Please go ahead.
Good morning. My question's around the level of investment in the business under the previous ownership. Just wanting to further understand that. I noticed you've got AUD 30-40 million to spend in incremental CapEx over the abnormal levels over the next three years. It's clear where that's sort of going at a high level. We just want to understand, given the cash flow has been around 100% cash conversion in recent years, has the business been invested in appropriately do you think under prior management, or are you looking to do something to extract those synergies further using that incremental CapEx? Just keen to understand that and how that relates to synergies a bit further. Thanks.
Yeah, Brian, I'm really glad that came up. Thank you. That AUD 30 million-AUD 40 million, I would advise you to think about that as growth CapEx, in the main. So we've spoken about the run- rate, sort of AUD 6 million-AUD 10 million of normal CapEx, and that AUD 30 million-AUD 40 million, which remember is over a 3-year period, is about expanding for future growth, our further integration in systems to allow us to take advantage of some of the opportunities that I've been speaking about. And so, it would be a mistake if anybody wanted to add that to the acquisition price without adding commensurate earnings.
Your next question comes from David Errington, Bank of America. Please go ahead.
Thank you. Good morning, Dave. Look, I can't question the strategic sense here. It definitely makes sense, and what I really like about this acquisition is that you're trying to continue to look ways of growing the company, and I think all CEOs should be encouraged in doing that, and you've got certainly a great track record. I suppose my question is, is following a bit from Brian's, is that whenever I hear the word synergy, and particularly synergies coming from companies that are pretty hard, they've run their businesses hard, such as Quadrant Private Equity, et cetera, there is a degree of cynicism, if you like. And when I deal with any company that makes acquisitions and they talk up the word synergies, I generally get, you know, very, very cautious.
So may I please ask you, page 29, would you give us another layer of, of detail, please? Because you explained it from the top down, but I'm trying to understand what those synergies entail. Are they growth synergies from sales? Are they cost out synergies? Are they efficiency synergies? You know, how much do you have to which I thought was a good question from Brian. I'm just a bit nervous when an acquisition talks up synergies so much. So may you please give us another layer so that we can be, you know, assured on what seems to be very strategically sound, but still, I'm a little bit nervous about what is going into those synergies and how much we can actually look at banking in our forecasts. If you could do that for us, that'd be terrific.
Thanks. Thanks, Dave. Thanks for the question. I'll quote you back to yourself, the healthy cynicism when buying from private equity, I recognize that, and I think we share that. I've spoken at length about the diligence, about the length of time that we've known this business and how we've watched it grow and scale. So I think we have a very good understanding of the business and the assets that we're buying. As I said, we're comfortable with the quality of the business that we'll be taking over on completion. From a synergy point of view, I'll give you a couple of examples perhaps to bring it to life.
You know, I used the example, I think, in response to Michael's question of, you know, the top one there, network optimization and shared services. While in phase one, there will be limited integration between our two businesses, there is an immediate opportunity to provide them with bulk storage scale, as a simple example. In terms of procurement synergies, you know, I just want to be clear, we have always believed in a productive and constructive engagement with our suppliers, and you've heard me talk about our acceptance of responsibility to be an efficient and effective route to market partner for them. I kind of, you know, I describe it as I want our suppliers waking up in the morning, wanting to do more business, not less with us.
And so we will engage with them constructively on the opportunity to improve pricing in both directions. What's obvious, though, is our ability to provide Superior with what I'll call FMCG product lines at a materially better cost than they would be buying it today. So you can think of things like, cleaning category, you know, that all restaurants and food service businesses would need. You can think about fizzy drinks, chocolates, chips, that kind of thing, where we can materially improve the pricing there. And then in terms of range extension into our business and into theirs, the example I'd use there for you is private label.
You know, we're often in a position where we don't quite have the scale, if you like, and they have a nice private brand business, and the ability to combine those two businesses in the very short term is obvious. So those are just some of the examples, certainly not extensive. You know, and as I said, you know, we do have a track record of over-delivering on synergies, so, you know, we wouldn't put it in the slides if we didn't have high confidence. And certainly we want to maintain that track record.
Your next question comes from Lisa Deng with Goldman Sachs. Please go ahead.
Hi, Doug. Congratulations again on the transaction. Can you give us a bit more color on the working capital profile of the three businesses, please? And then also just on the synergies, what does this mean for Hyperion? Sorry, not Hyperion, for Horizon. So do we need to include this as part of the Horizon costs, i.e., higher costs can be expected there? Thanks.
Hey, Lisa, thank you for your questions. So firstly, from a working capital, they're kind of typical wholesale working capital circles. They're variable through our year, as you can well imagine, and they have different peak periods, but they're not materially different from ours or material in number that would change the shape of our own working capital profile. We certainly, as I've kind of alluded to, would hope that we can help them. In terms of Horizon, this is not in the scope of Horizon, and you don't need to add anything more for Horizon.
Your next question comes from Richard Barwick with Jarden. Please go ahead.
Hi, Doug. Just wondering, to what extent have you talked with your existing customers about this Superior Foods, or at least sounded them out? Because I guess what I'm, I guess, a little bit worried about, is there a risk that you've got customers that say, right now Metcash will be an owner of Superior Foods, that for that customer, effectively they've got a single supplier, more eggs in one basket. Is that something that they will find less attractive, and therefore there's a bit of a risk around the revenues you're collecting, or is there a counterargument that says it's a good news item?
Hey, Richard. Thanks. A very insightful question. That's a good question. So, you know, we don't discuss these transactions of course with anybody ahead of time, but we do have a good understanding of our retailers. We do get some data on what they sell, that they don't buy from us. That's how we calculate our teamwork scores, as you know. But we don't see, for confidentiality reasons, who they buy from, and we're pretty strict about that. But we can see from what they're buying that many of them do buy, as you've pointed out, and you would expect from the food service sector. You know well that we have thousands of food customers, and so there'll be a range of perspectives.
I would imagine that if we had done this five years ago, there would have been a higher propensity of those customers to have some sense of discomfort. But even then, I think it would be in the minority. I would venture that today, the vast majority will welcome this. I just wanna give you a quick example. You've heard me talking about the Sorted platform, and that's our B2B e-commerce platform. I think I might have spoken about how quickly it got to 1 million transactions, and it's, you know, more than double that now. And that tool allows our customers to place orders on ranges that are in our distribution center, but also ranges that are not in our distribution center. So it's essentially a B2B marketplace.
The response to that has been very favorable, both from customers and suppliers. So certainly our intention is that we make available Superior's range through Sorted. What it does is it allows not just the retailer to buy the product easily. They can use the credit that they have with us, and we would supply all Superior. So we see it as an extremely positive thing, and I would expect that the vast majority of our retail customers would as well.
Your next question comes from Adrian Lemme with Citi. Please go ahead.
Hi, good morning, Doug and team. My question's relating to acquisitions in Superior Foods. So firstly, can we assume that from the FY 2023 to FY 2024 period, it's 20%, that's all organic? And then secondly, with the focus on the future for the first couple of years, should we assume that further acquisitions in this space would be unlikely? Thanks.
Hey, Adrian, thanks for the question. So yes, you, you're right about your assessment of the 10% organic. Our focus absolutely will be on bedding the business down. But because we're not anticipating high degrees of integration, you know, we're not just gonna, for example, put the accounts payable team and the payroll teams to smash them together. You know, we're gonna do this on a very sensible and sensitive basis, focusing on the real value drivers of both businesses. And so, whether we focus then on continuing to consolidate the market will depend on the opportunities that they present, our capacity to do them, and the value creation that would be available for our shareholders.
The next question comes from Ross Curran with Macquarie. Please go ahead. Ross Curran, your line is now live. Please proceed with your question.
Apologies. I had almost the exact same question as Adrian, just around consolidation. Can I ask a slightly different way? Is there a scale leverage point, you know, if you get to do margins materially change in the business?
Hey, Ross, I would say that the material inflection point was when you reach national scale, and that has now happened and been settled. You know, getting further scale, it always makes a difference, but it doesn't provide the same inflection point. So Superior, as I've said a few times, is now one of only three businesses that has done that. In that intervening period since they got there, they have started to win national contracts, so they've proven the ability to do so.
Thank you. There are no further questions at this time. I'll hand back to Mr. Jones for any closing remarks.
Thanks very much, and thank you everybody for your time and attention, short notice. It's heartening to hear the feedback on the strategic case of these acquisitions. Certainly I just wanna reiterate my excitement around these announcements. As I've said, it's a step change in our business. It makes us stronger, it makes us more diversified. It strengthens our core business, and it accelerates our growth strategies. Superior in particular makes both businesses a stronger, higher quality business together, and as I've noted, overnight sales our food service business. And in hardware, very much a continuation of our existing strategies, and so we feel very comfortable with it.
So with that, I'd like to wish you all a good day further, and I look forward to interacting with you individually in the future.
That concludes our conference for today. Thank you for participating. You may now disconnect.