The Woolworths Group Ltd (ASX: WOW) share price is down around 1% after ASX 200 (ASX: XJO) business revealed a $150 million deal.
While Woolworths is best known for being a supermarket business, it does have a growing portfolio of additional businesses.
Shopper Media Group acquisition
Woolworths announced that its retail media business, Cartology, has agreed to buy 100% of Shopper Media Group for cash of approximately $150 million.
If you haven’t heard of Cartology, it was established in 2019 to provide customer-led retail media solutions to connect brands with customers. Its digital advertising network has over 1,500 screens.
What’s Shopper Media? It was described as a leading Australian digital out of home media company, offering “targeted shopper advertising through a national screen network of more than 2,000 screens in over 400 shopping centres.”
Why is Woolworths buying this business?
Cartology is attracted to the “outstanding retail context and proximity” of Shopper’s screen network, as well as the fact it has invested heavily in technology.
This acquisition is seen as an important next step in unlocking growth potential of Cartology. It wants to become the trusted media partner of choice for brands and retailers, allowing it to provide its clients more opportunities to reach their customers through “seamless and targeted advertising solutions.”
Woolworths CEO Brad Banducci said:
Retail media is developing rapidly and is an important part of the evolution of Woolworths Group. We’re excited about the opportunity to bring together the complementary capabilities of our retail media business, Cartology, with Shopper’s expertise in out of home media.
My thoughts on this deal
I’m no expert on digital advertising, so I’m not sure how important this deal will be for Woolworths and Cartology and its planned growth.
It’s interesting that Woolworths shares are down while the ASX 200 is up approximately 0.5%, investors don’t seem to be a fan of the deal.
It will be interesting to see how much value Woolworths can extract from this deal over time and whether it was a good price. Either way, it’s small compared to the overall size of Woolworths.
Higher food inflation should help Woolworths earnings in the short-term, but higher interest rates theoretically are meant to hurt valuations. At the current Woolworths share price, I don’t think that it represents great value at this stage.
