Woolworths Group is set to invest $586 million into family founded business Petspiration Group, the owner and operator of PETstock.

The supermarket giant has entered into an agreement to acquire a 55 per cent equity interest in Petspiration, while founders Shane and David Young will retain a 45 per cent stake and continue as CEO and Managing Director respectively.

The investment follows a five per cent sell-down of its stake in Endeavor Group, worth $636 million, freeing up capital to invest in the country’s second largest player in the pet segment, which has a network of 276 PETstock stores and established eCommerce platforms such as Pet.co.nz.

Brad Banducci, CEO of Woolworths Group, said speciality pet is a large and growing retail segment in which Woolworths has limited presence.

“Specialty pet is a logical adjacency given the high penetration of pet ownership across Australia and New Zealand.

“We will work together to support Petspiration’s growth through access to our retail capabilities in areas such as Digital and eCommerce, Supply Chain, Retail Media, Format and Network Development, and Advanced Analytics.”

The $586 million investment implies an enterprise value of approximately $1.7 billion, and is expected to deliver mid-teens internal rate of return, with identified value creation opportunities to support strong earnings growth.

Shane Young said this is a unique opportunity to partner with Woolworths to continue to grow and strengthen the business they founded in Ballarat over 30 years ago.

“We will operate independently of Woolworths Group but will work closely together through our common values to deliver on all the opportunities we have to jointly create value for our pet families and supplier partners.”

The transaction is subject to customary closing conditions and approvals and is expected to be complete by mid-2023.