Axfood (Buy, TP: SEK330.00) - Acquires City Gross
Axfood has announced it is to acquire City Gross, entering the hypermarket segment. Although City Gross will be a drag on near-term earnings, Axfood expects it to contribute positively to EPS by 2026 at the latest. Given an attractive EV/sales of 0.22x LTM to April, versus Axfood’s 2024e of 0.8x, we believe the acquisition makes strategic sense as it will diversify the company more across the Swedish grocery market.AxFood AB is a food retail company. Co. conducts food retail and wholesale business in Sweden. Retail business is conducted through the Willys, Hemkop and PrisXtra chains, with a total of 252 Co.-owned stores at Dec 31 2013. In addition, Co. collaborates with a number of proprietor-run stores that are tied to it through agreements, including stores in the Hemkop chain as well as stores operating under the Handlar'n, Tempo and Direkten brands. Wholesaling is conducted by Dagab and Axfood Narlivs, whose customers consist primarily of mini-markets, service stations and other convenience stores. Axfood Narlivs also operates 20 cash and carry outlets via the subsidiary, Axfood Snabbgross AB.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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