Woolworths Group is set to acquire a 65% equity interest in Australia’s PFD Food Services, along with a 100% stake in its freehold properties for $552m.

PFD’s freehold properties primarily consist of 26 distribution centres.

PFD Food Services CEO Kerry Smith will retain a 35% stake in the company, which will be acquired by Woolworths in the next few years.

Following the acquisition, PFD will continue to operate as a standalone business and retain senior leadership team. It will also partner with Woolworths for delivering improved experiences for customers.

Woolworths Group CEO Brad Banducci said: “This investment is a logical adjacency for Woolworths Group and further supports the evolution of the group into a food and everyday needs ecosystem.

“It will build on our existing partnership with PFD, the number two player in the large and fragmented out-of-home foodservice and non-retail business-to-business markets.

“The investment will also unlock synergies for both businesses across the combined network and fleet. We will help to support PFD’s growth through access to our logistics, digital and data analytics and operational capabilities.”

Additionally, the acquisition will improve the company’s store range localisation and provide fleet synergies through improved route and capacity optimisation across its network.

PFD will operate independently under Smith and a separate board and governance structure will be implemented with founder Rick Smith’s involvement.

Kerry Smith said: “In Woolworths Group, we are confident we have found a partner with shared experience and expertise, but also whose operations and vision for the future complement our own.”

The transaction is subject to approval from the Australian Competition and Consumer Commission (ACCC) and the satisfaction of customary closing conditions. It is expected to close by the end of 2020.

Woolworths will fund the purchase price from existing cash reserves and available debt facilities.