Axfood AB ("Axfood") has reached an agreement with Bergendahl Food Holding ("Bergendahls") to acquire shares corresponding to 90.1 percent of City Gross Sverige AB ("City Gross"), which entails that Axfood increases its shareholding in City Gross from the current 9.9 percent to 100 percent. Since 2021, Axfood has through its minority stake exercised joint control in City Gross and has a long-term cooperation agreement in for example logistics, assortment and purchasing, private labels, store safety, finance, HR and IT.

- We are very pleased to have reached this agreement with Bergendahls and welcomes all City Gross employees to the Axfood family. We very much believe in the potential of City Gross, and as an owner we will invest to develop the concept and make operations more efficient. We look forward to work together on strengthening the chain's market position and more clearly challenge the large players in the growing hypermarket segment, in which Axfood is currently only present through its minority stake in City Gross, says Klas Balkow, President and CEO Axfood.

After a long period of stable profitable development, City Gross has, similar to many players on the market, had a somewhat weaker development during the recent period of high inflation. The business has also gone through large internal changes recently, including rearrangement of the assortment, new IT infrastructure, and in logistics. With Axfood's knowledge and experience, conditions are created to further develop and strengthen City Gross' concept and implement efficient operations throughout the entire chain. This will lead to strengthening of City Gross' competitiveness in comparison to the large players in the hypermarket segment. Acquiring City Gross gives Axfood a more distinct market position in the hypermarket segment, thereby expanding the Group's presence and reach.

- This deal creates the best conditions to strengthen City Gross competitiveness and its position on the market, to be able to expand going forward. Axfood is the right owner for City Gross in the future to develop the hypermarket concept over time, says Lars Ljungälv, President and CEO of Bergendahl & Son AB.

City Gross will be reported as a separate operating segment in Axfood's financial reporting. The acquisition is expected to contribute positively to Axfood's earnings per share by 2026 the latest.

About City Gross
City Gross is a Swedish food retail chain with a market share of approximately 3 percent. Currently, City Gross has approximately 2,800 employees and a store network of 42 stores mostly in the southern parts of Sweden. During the last twelve months to April 2024, City Gross' net sales amounted to SEK 9.1 billion, and the adjusted operating profit[1] was SEK -132 million.

About the transaction
The consideration amounts to SEK 2 billion on a cash and debt free basis, and the acquisition will be financed through a combination of existing cash and credit facilities. Axfood estimates transaction costs to amount to approximately SEK 25 million.

Axfood intends to pursue a number of improvement initiatives to strengthen the customer offering, implement chain management and make operations more efficient, all with the purpose to strengthen City Gross to reach profitability by 2026 the latest and thereafter gradually strengthen profitability.

The acquisition entails a dilutive effect on the Axfood Group margin at closing by approximately 0.3 percentage points on a rolling twelve-month basis, from which there will be a gradual contribution towards Axfood's long term financial target of an operating margin of at least 4.5 percent.

Completion of the transaction is subject to approval by the Swedish Competition Authority and the European Commission. Both parties have agreed that closing can take place no earlier than 1 September 2024.

Invitation to a conference call for analysts and the media
The transaction is presented in closer detail by Klas Balkow, Axfood's President and CEO, and Anders Lexmon, CFO, in a presentation webcast/teleconference held in English for investors and the press at 10.00 a.m. (CET) today, Tuesday 11 June 2024. To follow the presentation webcast, please use this link (https://ir.financialhearings.com/axfood-conference-call-june-2024). To participate via teleconference, please register via this link (https://conference.financialhearings.com/teleconference/?id=50050067). After registration, you will be provided with telephone numbers and a conference ID to access the conference.

For further information, please contact:
Magnus Törnblom, Head of Press Axfood, tel +46 70 266 27 12, magnus.tornblom@axfood.se
Alexander Bergendorf, Head of Investor Relations Axfood, tel +46 73 049 18 44, alexander.bergendorf@axfood.se

The information herein is such that Axfood AB (publ) is required to make public in accordance with the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person listed above, at 8:00 a.m. CET on 11 June 2024.

[1] Excluding structural costs associated with the store network and integration.