The Metcash Limited (ASX: MTS) share price won't be going anywhere on Thursday.
That's because the ASX 200 stock requested a trading halt before the market open.
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Why is this ASX 200 stock in a trading halt?
Metcash rather helpfully provided investors with a reasonably detailed reason for its trading halt. Its request states the following:
Metcash Limited requests that its securities be placed in a trading halt with immediate effect pursuant to ASX Listing Rule 17.1. Metcash refers to the article in the Street Talk section of today's Australian Financial Review speculating that Metcash may be in advanced discussions in relation to the acquisition of Superior Food Group.
Metcash confirms that it is in discussions with the vendors concerning the potential acquisition of Superior Food Group, however, at this stage the discussions are incomplete and there is no certainty that they will lead to a transaction. The trading halt is requested pending an announcement relating to the potential acquisition and is required to ensure that Metcash securities are not trading on a misinformed basis.
What's happening?
While discussions have been confirmed, Metcash hasn't provided any colour on how much it is potentially paying for Superior Food Group. Nor has it advised how it may seek to fund the purchase.
According to the article in question from the AFR, the ASX 200 stock would need to stump up about $500 million for the acquisition.
This is based on recent deal multiples and Superior Food being on course to generate $55 million of EBITDA in the 2025 financial year.
It remains unclear whether it will need to raise funds for the purchase or if it will use cash, debt, or scrip. Metcash ended the first half of FY 2024 with cash and equivalents of $96.9 million.
What is Superior Food?
On the surface, Superior Food would be a good addition to the wholesaler's business.
It supplies ingredients, packaging, and cleaning items to restaurants, cafes and aged care homes.
But as things stand, the ASX 200 stock has warned that there's no guarantee that a deal will be made. Metcash intends to provide an update on the potential acquisition by Monday morning.
