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Empire to buy Farm Boy chain for $800 million

Sobeys parent aims to accelerate fresh market’s expansion

Russell Redman

September 24, 2018

4 Min Read
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Sobeys Inc. parent Empire Company Ltd. is acquiring Ottawa-based fresh grocer Farm Boy in an $800 million (Canadian) deal.

Empire said Monday that, under the transaction, it will purchase Farm Boy from Berkshire Partners and the chain’s management shareholders. Plans call for Farm Boy to be set up as a separate company within Empire, and Farm Boy's co-CEOs have agreed to reinvest in return for a 12% interest in the business.

With 26 stores in southeastern Ontario, Farm Boy specializes in local fresh produce and meat and serves up a wide range of ready-to-eat foods prepared in-store. Empire noted that the retailer also operates a robust private label program.

Farm_Boy_store_produce_dept_0.pngFarm Boy opened its first stores in the greater Toronto area earlier this year, and its 27th location is slated to open at the Oakwoods Centre shopping center in Oakville, Ontario, this winter.

Stellarton, Nova Scotia-based Empire called the chain an “excellent fit” with its Sobeys and FreshCo banners in Ontario, a region where the company said it’s “underpenetrated.” To that end, Empire aims to step up the rollout of the Farm Boy concept in greater Toronto and southwestern Ontario through new construction and conversions of some current Sobeys locations, with a longer-term plan to expand the format to other parts of Canada.

In addition, Empire expects to further its penetration into the greater Toronto market by adding Farm Boy’s private brand products to Sobeys' Ocado-based e-commerce business, which is due to launch in the Toronto market in 2020.

“Farm Boy is a superb strategic and financial acquisition. It strengthens our reach in the key Ontario and greater Toronto area markets, it will be a growth vehicle in urban and suburban markets, and its very strong private label program will bolster our Ocado-driven e-commerce business," Empire President and CEO Michael Medline said in a statement.

“Farm Boy has a best-in-class brand with stellar customer loyalty. Its fresh, ready-to-eat and private label offerings are particularly appealing to urban and suburban consumers. It truly is 'all about the food' at Farm Boy,” Medline added. “We believe we will be able to build on their historical, industry-leading same-store sales growth of 5.3% and five-year EBITDA compound annual growth rate of 21% to double the size of the business in the next five years.”

Farm Boy co-CEOs Jean-Louis Bellemare and Jeff York will continue to manage the chain after the acquisition closes. They will report directly to Medline.

“As you prepare for the next phase of growth, you don't just team up with anyone. Empire understands what it will take, shares our vision for the brand, and in President and CEO Michael Medline and CFO Mike Vels, we have access to executive leadership with deep experience in making acquisitions like this successful,” said Bellemare, who founded Farm Boy in 1981. “We had many choices, but our trust and confidence in Empire and its dedication to our brand and its growth made this the perfect partnership."

The companies said Farm Boy will benefit from Empire's infrastructure and capabilities in real estate, sourcing and logistics, providing certain non-customer facing synergies and enabling faster and even more effective store expansion.

“Together with Empire, an iconic Canadian brand with a national grocery presence, Farm Boy will significantly accelerate its growth agenda,” said York, who has been co-CEO at Farm Boy since 2009. “We will strengthen the already strong Farm Boy brand, starting with urban and suburban markets in Ontario and eventually rolling out to other areas of Canada. We are particularly excited by the eventual reach of the Ocado e-commerce platform and can’t wait to showcase our high-quality, local products to many more Canadians."

Medline added, “We intend to enable the leadership team of Farm Boy to do what they do best: grow a highly successful retail format at double digit rates.”

Empire reported that the acquisition deal’s total enterprise value of $800 million represents a 14.1x multiple of Farm Boy’s estimated EBITDA in Empire's 2020 fiscal year. Pending regulatory approval and customary closing conditions, the transaction is expected to close at the beginning of 2019.

In a conference call with analysts on Monday, Medline called Farm Boy “a jewel of an asset.”

“Farm Boy is the most compelling bricks-and-mortar grocery opportunity available today and likely the foreseeable future,” he said in the call. “Farm Boy is also the most insulated Canadian food retailer from e-commerce disruption due to the laser-light focus on fresh, private label and prepared foods. We are much more willing to pay top dollar for a great company.”

Overall, Sobeys owns, affiliates or franchises more than 1,500 stores in all 10 provinces under such banners as Sobeys, Safeway, IGA, Foodland, FreshCo, Thrifty Foods and Lawtons Drugs. Its retail network also includes over 350 fuel locations.

About the Author

Russell Redman

Senior Editor
Supermarket News

Russell Redman has served as senior editor at Supermarket News since April 2018, his second tour with the publication. In his current role, he handles daily news coverage for the SN website and contributes news and features for the print magazine, as well as participates in special projects, podcasts and webinars and attends industry events. Russ joined SN from Racher Press Inc.’s Chain Drug Review and Mass Market Retailers magazines, where he served as desk/online editor for more than nine years, covering the food/drug/mass retail sector. 

Russell Redman’s more than 30 years of experience in journalism span a range of editorial manager, editor, reporter/writer and digital roles at a variety of publications and websites covering a breadth of industries, including retailing, pharmacy/health care, IT, digital home, financial technology, financial services, real estate/commercial property, pro audio/video and film. He started his career in 1989 as a local news reporter and editor, covering community news and politics in Long Island, N.Y. His background also includes an earlier stint at Supermarket News as center store editor and then financial editor in the mid-1990s. Russ holds a B.A. in journalism (minor in political science) from Hofstra University, where he also earned a certificate in digital/social media marketing in November 2016.

Russell Redman’s experience:

Supermarket News - Informa
Senior Editor 
April 2018 - present

Chain Drug Review/Mass Market Retailers - Racher Press
Desk/Online Editor 
Sept. 2008 - March 2018

CRN magazine - CMP Media
Managing Editor
May 2000 - June 2007

Bank Systems & Technology - Miller Freeman
Executive Editor/Managing Editor
Dec. 1996 - May 2000

Supermarket News - Fairchild Publications
Financial Editor/Associate Editor
April 1995 - Dec. 1996 

Shopping Centers Today Magazine - ICSC 
Desk Editor/Assistant Editor
Dec. 1992 - April 1995

Testa Communications
Assistant Editor/Contributing Editor (Music & Sound Retailer, Post, Producer, Sound & Communications and DJ Times magazines)
Jan. 1991 - Dec. 1992 

American Banker/Bond Buyer
Copy Editor
Oct. 1990 - Jan. 1991 

This Week newspaper - Chanry Communications
Reporter/Editor
May 1989 - July 1990

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