Canada’s Empire Co. Ltd. is increasing its footprint in the greater Toronto area (GTA) by signing an agreement to purchase 51% of Longo's, a family-built network of specialty grocery stores, and the chain's Grocery Gateway e-commerce business.
Longo's and Grocery Gateway join Empire's family of brands in Ontario, which already includes Sobeys Inc., Foodland, FreshCo, Farm Boy and Voilà.
"Empire has strong momentum, and we are laser-focused on our Project Horizon growth plans in key markets like the GTA, both in bricks and mortar and e-commerce," said Michael Medline, president and CEO of Empire. "Longo's has built one of the most successful and sought-after brands in the GTA and Southwestern Ontario. Longo's is a crown jewel of grocery, and as a values-driven company, Longo's culture aligns closely with Empire. We couldn't be happier to be partnering with Anthony and the Longo's team."
Empire intends to continue to grow the Longo's and Grocery Gateway businesses while unlocking benefits through non-customer-facing synergies. Longo's and Grocery Gateway customers will see no changes to their experience.
"With strong alignment to our family values and purpose, we look forward to working together with Empire to bring the Longo's experience to even more Canadian families," said Anthony Longo, president and CEO of Longo's, which is based in Vaughan, Ontario. "The more we learned about Empire, the clearer it became that this was the right team to partner with to support our next chapter of growth. And of course, we will continue to offer the same high-quality service and fresh products, exceptional private-label offering, and the convenience of e-commerce that our guests have come to know and love."
Beginning as family-owned retailer in 1956, Longo's has since grown to a company that operates 36 stores in communities across Toronto and the GTA, including 10 new stores in the past five years, as well as Grocery Gateway, a leader in online sales of home-delivered groceries.
Longo's sales were approximately $1.1 billion for the year ended Feb. 28, and it plans to open several new stores over the next five years.
Grocery Gateway, which currently serves 70,000 customers, will continue as a stand-alone business. Empire will continue to invest in the growth of Grocery Gateway's customer base while seeking efficiencies through collaboration with Empire's fast-growing Voilà online business.
Longo's will continue to be led by Anthony Longo and his team. Although managed separately, Longo's is expected to benefit from Empire's infrastructure and capabilities in areas such as sourcing, logistics and real estate.
For the transaction terms, Empire will initially acquire 51% of Longo's issued and outstanding shares, based on a total enterprise value of $700 million.
The transaction structure allows Empire to achieve 100% ownership of Longo's over time. After the fifth anniversary of the transaction, the Longo's shareholders have an option to sell up to a 12.25% interest to Empire per annum, at a multiple applied to the last 12 months EBITDA that will vary depending on the achievement of certain business results. If Longo's shareholders exercise an option to sell, Empire will have a corresponding call option for the same percentage in the following year. After the 10th anniversary of the transaction, both Empire and Longo's have mutual put and call options for any remaining minority shares outstanding.
Subject to customary closing conditions, the transaction is expected to close in the first quarter of fiscal 2022.
Empire is a Canadian company headquartered in Stellarton, Nova Scotia. Empire's key businesses are food retailing, through wholly owned Sobeys, and related real estate. With approximately $28.4 billion in annual sales and $15.0 billion in assets, Empire and its subsidiaries, franchisees and affiliates employ approximately 127,000 people. Sobeys is No. 21 on The PG 100, Progressive Grocer's list of the top food retailers in North America.