- Only sizeable sector operator in Finland, Sweden, Norway
- Planned market entry to continental Europe could be complemented by bolt-ons
Musti Group [HEL:MUSTI], the Finland-headquartered pet care specialist, sees itself as a potential takeover target for an international player amid sector consolidation, CEO David Ronnberg and CFO Toni Rannikko said.
The EUR 710m-market cap firm strongly believes there will be continued consolidation in its market, Ronnberg said. He pointed to Cinven and German firm Fressnapf recently acquiring Italian pet care retailer Arcaplanet, reportedly for more than EUR 1bn. Another German company, Zooplus, was recently taken private by Hellman & Friedman and EQT for EUR 3.7bn, he noted.
Musti Group is the main pet care retailer in Finland, Sweden and Norway, with a 25% overall market share, Rannikko said. There is no other large pet care specialist, with the main competition coming from grocery stores, he said. In the online segment, Musti Group has around a 50% market share; Zooplus is the main competitor with an approximate 30-40% market share, he added.
“If some big player wanted to go to the Nordics, we would be the only choice”, Rannikko stated.
Notable large players in Europe are Zooplus, Fressnapf and UK-based Pets at Home [LON:PETS], Ronnberg said. There are also US-based companies that could look at M&A in the European market, he said.
Ronnberg declined to comment on whether Musti Group has had discussions to this effect.
The company listed on Nasdaq Helsinki in early 2020, but the previous majority owner EQT did consider selling the company in 2019, as reported by this news service.
At the time, there were some question marks hanging over the sector, which might have deterred potential buyers, but these question marks have since been resolved, Ronnberg said.
These questions included how resilient the pet space was, whether there would be a shift from premium to low price, whether Amazon [NASDAQ:AMZN] would take over the whole market upon its entry into Sweden in 2020, and whether German and UK-based companies would enter the Nordics, he said.
In hindsight, the sector has remained resilient including throughout the COVID-19 pandemic and through a rising inflationary environment.
Musti Group has also not noticed any negative effects from Amazon’s Swedish expansion– it provides convenience and service that customers cannot get from online-only players, he said.
Musti’s net sales increased by 16% from October 2021-June 2022, compared to the same period the year prior. The company is growing significantly faster than its underlying market, which is currently growing by ca. 5% annually, compared to ca. 4% pre-COVID-19, Rannikko said. Musti is confident it will achieve 35-40% growth on a two-year basis, Ronnberg added.
According to Dealogic Institutional Analytics and data submitted by the company, Musti’s largest shareholders are Capital Group, Fidelity and Investment AB Oresund.
The company has been a popular stock since its IPO and is trading 139% above its EUR 8.75 IPO price.
Geographic expansion, organic growth in focus
Musti Group is focused on growing organically, by opening new stores in existing markets, the executives said. The company historically entered Sweden through the acquisition of Zoo Support in 2015 and then acquired Swedish Djurkompaniet in 2017. Later in 2017, it also acquired Swedish e-retailers VetZoo and Animail. However, since then, acquisitions have been limited to single, individual stores, and there are no chains that Musti is interested in buying, Ronnberg said.
The company is planning to expand to new geographies and has done an analysis of which countries are best for expansion, but there is no timeframe for this, Ronnberg said, citing an uncertain macroeconomic climate as the reason for holding off.
He did not name the markets of interest, although stated they would likely be in continental Europe, south of and close to the Nordics. Entry into new markets will likely happen organically, possibly complemented with small acquisitions, Ronnberg said, noting that the company entered Norway through greenfield expansion, which has been successful.
Musti recently acquired 16 franchise stores in Finland, and now owns all its stores in Finland and Norway, according to a company press release. In Sweden, it still has 15-20 franchise stores, and is looking to acquire around half of them, Rannikko said.
It aims to open another 25-30 new stores per year, mostly in Sweden and Norway and to a lesser extent in Finland, Ronnberg said. The company opened 55 new stores in the last 12 months, he added.
Musti is also focusing on growth in the services segment, including grooming and training, Ronnberg said. It currently offers such services at 90 stores and plans to increase this to 180 stores in the next 18-24 months, he said. The company has a total of 329 stores.
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