Parkland To Acquire M&M Food Market For $322M

Parkland Corp. has entered into an agreement to acquire M&M Food Market. M&M is a premium, restaurant-quality, frozen food retailer which brings high-quality, convenient food choices to Canadians. This acquisition represents one of many steps it is taking in its retail diversification strategy to expand its proprietary food offering, customer reach and innovation pipeline.

"This acquisition provides a platform to grow our food offer, expand our proprietary brands, and advance our digital and loyalty strategy," said Ian White, senior vice-president, strategic marketing and innovation. "Consistent with our commitment to create convenience destinations, M&M's national store network, and innovative approach to food preparation and menu development, positions us to offer high-quality food that complements our growing quick-serve restaurant offerings. We will grow these capabilities in all our operating regions and bolster our digital connection to customers by combining M&M and Journie rewards programs. We look forward to bringing On the Run and M&M together to help customers make the most of every stop."

The acquisition includes over 300 well-located stand-alone franchise and corporate-owned stores, over 2,000 M&M Express locations, and a well-established rewards program with approximately two million active members. Led by an experienced management team which has a proven record of growth and a food-first culture, M&M will create quality food options that its customers can consume fresh from frozen, both on site and on the go, and prepared from frozen at home. It will leverage these capabilities throughout its existing network and soon-to-be-launched stand-alone On the Run convenience locations.

"Parkland's On the Run brand is a convenience retail leader, and we are excited to combine our two offerings," said Andy O'Brien, chief executive officer of M&M. "M&M and its franchise partners share Parkland's customer focus and passion for quality food. The combination of our innovative food capabilities and Parkland's more than 3,000 retail locations in 25 countries creates an immediate runway of growth and expansion opportunities."

This acquisition enables key elements of the company's strategy:

  • Advances its enterprise food strategy: adds a proprietary brand, experienced team, franchisee network, and a scalable fresh and fresh-from-frozen food growth platform across all of its markets; it will leverage M&M's expertise and record of developing successful menus in its innovation kitchen to evaluate and develop additional fresh and quick-serve food choices across its network;

  • Advances its digital strategy and creates a premier Canadian loyalty program: by combining Journie's and M&M's reward programs, which have two million active members, it will create extensive cross-promotional opportunities and form one of Canada's premier loyalty programs;

  • Enhances its On the Run customer value proposition: M&M will be integral to its growing On the Run network, bolstering its in-store, e-commerce and home delivery offers, and supporting its stand-alone convenience concept;

  • Capital light: M&M leverages a well-established, highly efficient food preparation and distribution network, requiring limited capital investment to efficiently serve its retail locations;

  • Rateable cash flow with significant growth potential: M&M's royalty fee-based operating model creates a rateable stream of cash flow; it aims to expand M&M's Canadian annual run rate adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to approximately $55-million in three years.

The total consideration for this transaction is approximately $322-million, which will be financed out of the company's existing credit facility capacity. This acquisition represents a valuation metric of fewer than 8.5 times estimated 2021 adjusted EBITDA. Subject to approval under the Competition Act (Canada) and other customary closing conditions, the acquisition is expected to close in the first quarter of 2022.

Acquisition conference call and webcast details

Parkland will host a webcast and conference call on Jan. 18 at 4 p.m. MDT (6 p.m. EDT) to discuss the acquisition.

Analysts and institutional investors interested in participating in the question-and-answer session of the conference call may do so by calling 1-888-390-0546 (toll-free) (conference ID: 68511332). International participants can call 1-800-389-0704 (toll) (conference ID: 68511332).

Please connect and log in approximately 10 minutes before the beginning of the call. The webcast will be available for replay two hours after the conference call ends. It will remain available for one year and will also be posted to the Parkland website.

About Parkland Corp.

Parkland's purpose is to power journeys and energize communities. It is a leading operator and consolidator of convenience retail and fuel marketing businesses. Through its portfolio of trusted and locally relevant convenience, retail, commercial and wholesale brands, it serves over one million customers per day across Canada, the United States, the Caribbean region, and Central and South America. In addition to leveraging its supply and storage capabilities to provide the essential fuels that its diverse customers rely on, it is a leader in manufacturing low carbon fuels and is rapidly building a charging network to serve growing demand for convenient charging from electric vehicle drivers in select markets.

Parkland's proven strategy is centred around growing organically, realizing a supply advantage, acquiring prudently and integrating completely. It is positioned to win through the energy transition and is focused on developing its existing business in resilient markets, further diversifying its retail business into convenience, food and electric vehicle charging, and helping its commercial customers decarbonize their operations. Its strategy is enabled and underpinned by its people, as well as its values of safety, integrity, community and respect, which are deeply embedded across the organization.

About M&M Food Market

Founded in 1980, M&M Food Market is Canada's leading retailer of frozen foods and has helped Canadians put delicious meals on the table by offering consumers products that were prepared with care using authentic recipes and high-quality ingredients along with personalized customer service, all within a uniquely convenient shopping environment. Following the beginning of a significant rebranding effort in 2016, including the name change from M&M Meat Shops, a new store design, new products and packaging, a new website, and newly trained meal advisers, M&M Food Market has been focused on innovation across virtually every aspect of the business. It is headquartered in Mississauga, Ont., with locations in all 10 provinces, Yukon and the Northwest Territories. M&M has been recognized as one of Canada's best managed companies for 11 years in a row. M&M products include delicious and convenient options across virtually every food category, including appetizers, prepared meals, seafood, meats and poultry, vegetables, sides, bakery, and desserts, and come in formats ranging from individual portions to family-sized options.