Tractor Supply Company is expanding its presence in the Midwest with the purchase of a family-owned farm supply retailer.
The nation’s largest rural lifestyle retailer has received clearance from the Federal Trade Commission to close on its previously announced acquisition of Orscheln Farm and Home. Under the terms of the agreement, Tractor Supply is purchasing 166 Orscheln Farm and Home stores for approximately $320 million in an all-cash transaction. The deal is expected to close Oct. 12.
[Read more: Tractor Supply acquires 167-store Orscheln Farm and Home]
As part of an agreement reached with the FTC, Tractor Supply will divest 85 of the acquired locations to two buyers — Bomgaars Supply (73 stores) and Buchheit Enterprises (12 stores) — shortly after closing the transaction.
Proceeds of the store divestitures will be approximately $72 million. In addition, Tractor Supply has agreed to sell the Orscheln Farm and Home corporate headquarters and distribution center to Bomgaars for approximately $10 million within 15 months after the closing of the transaction.
Over the course of the next 15 months, the 81 stores retained by Tractor Supply will be remodeled to the Tractor Supply brand.
The store divestitures and sale of the corporate headquarters and distribution center bring the net purchase price of the 81 stores acquired to approximately $238 million, before working capital adjustments. The acquisition is anticipated to generate an estimated future tax benefit of approximately $20 million.
"Today is an important day for Tractor Supply as this acquisition expands our ability to better serve our customers in the Midwest," stated Hal Lawton, Tractor Supply president and CEO. "We are committed to providing customers in the region with an elevated product assortment, a meaningful loyalty offering, an enhanced digital shopping experience and so much more that Tractor Supply is able to offer."
Lawton added that Tractor Supply is on track to achieve several "monumental milestones" in its growth, including annual revenues in excess of $14 billion, a store base of more than 2,100 locations and a "highly engaged" workforce of 50,000 employees.
"We are excited to build on our track record of long-term growth as we look to unlock revenue and earnings opportunities with this attractive acquisition that enhances our growth profile," he said.
Additional highlights of the deal include:
- For the fourth quarter and fiscal 2022, the revenue from the acquisition is anticipated to add about $75 million to Tractor Supply’s net sales. Given the transaction expenses and early implementation costs to be recorded in the fourth quarter of 2022, the impact of the acquisition is expected to be relatively neutral to operating income in the quarter and for the year.
- For fiscal 2023, the revenue from the acquisition is anticipated to add at least $300 million to Tractor Supply’s net sales and be accretive by at least $0.10 to diluted earnings per share.
- The company is raising its outlook for store growth opportunities to 2,800 locations, an increase of 100 stores.
- Post-closing, the company estimates it will have annual revenues over $14 billion, more than 2,100 Tractor Supply stores and 50,000 employees.
Headquartered in Brentwood, Tenn., Tractor Supply operated 2,016 stores in total across 49 states as of Aug. 24, 2022, along with 178 Petsense by Tractor Supply stores in 23 states.