M&S Gist 4

Marks and Spencer Group has acquired Gist, the principal contract logistics provider to M&S Food, for £230m and said the move will accelerate its plan to modernise the food supply chain network.

The British retailer said it spied substantial opportunities to create a more efficient supply chain and could reduce costs, update legacy systems and improve automation.

Gist has worked with M&S for decades, as well as providing logistics services for third parties and freight forwarding work for BOC.

In 2009, it signed a major contract with M&S, securing all foods operations and since then it has been providing the majority of M&S Food logistics services via its network of eight primary and 10 secondary distribution depots across the UK and Ireland.

However, the retailer said the existing arrangement had a higher cost legacy contract that was due to expire in five years’ time and so this acquisition would provide immediate benefits with the elimination of contractual fees and costs.

M&S added that it could now take control of the network, make investments in it and build on the supply chain optimisation programme Vangarde.

The deal means M&S buys Gist’s entire share capital for an initial consideration of £145m in cash.

A further cash sum of £85m plus interest will be payable from the proceeds of the onward disposal of freehold properties, or at the latest on the third anniversary of completion of the acquisition.

It added an additional profit share from the disposal proceeds of up to £25m will be payable under certain conditions and that if it wishes, M&S can retain the freehold properties; in which case £110m plus interest will be payable.

Stuart Machin, M&S chief executive, said: “M&S has been tied to a higher cost legacy contract, limiting both our incentive to invest and our growth.

“The last two years have shown what can be achieved by working collaboratively alongside our partners at Gist.

“This has given me confidence that now is the time to take action and remove an impediment to our growth.

“We have therefore acted decisively to acquire Gist, taking control of our food supply chain for the first time in our history.”

Machin added: “This is the first step in a multi-year plan which will transform the entire supply chain.”

Gist generated a pro forma EBITDA of around £55m in the year ending 31 December 2021, with the majority of profit reflecting management fees recharged to M&S under contractual arrangements, which will now be eliminated upon the consolidation.

The deal was announced as Associated British Foods said it had poached Marks and Spencer Group’s chief financial officer, Eoin Tonge, to be its finance director and he will start no later than February 2023.