Woolworths and its US partner, Lowes Cos. have given us a glimpse of its plans for Danks Holdings, the small hardware group which will form the basis for the retailers’ $1.5 billion plunge into the sector from later this year.
They say they will maintain Danks’ already stated plans to grow bigger in hardware by acquiring more outlets and competitors; they will revamp the company’s logistics and inject more capital to grow the business more quickly.
In a bidder’s statement released to the ASX yesterday, the company (called Carboxy Pty Ltd, two third owned by Woolies and one third by Lowes) said that it will conduct a quick and intense review of Danks, once it gains control after its $87 million dollar offer is successful.
No change in the names or business model at Danks is contemplated, meaning the initial impact of the takeover will be felt in Danks’ distribution business to independent hardware outlets and its existing chains.
"Subject to the outcome of the review referred to above, Bidco intends that the Danks business and the Hardware Joint Venture will be conducted on a co-ordinated basis and that at some point the Danks business will be integrated into the Hardware Joint Venture.
"The Hardware Joint Venture will utilise Danks’ local product sourcing arrangements, industry expertise and, initially, supply chain capacity and infrastructure.
"Danks will utilise the Hardware Joint Venture’s access to capital, superior supply chain systems, shared services infrastructure and combined buying volume.
"A new and enhanced supply chain capability and capacity will be developed and be available to service Danks’ customers.
"New warehouse facilities and systems will be developed, and existing facilities and systems will be enhanced. Logistics practices will be reviewed to yield more efficient service to Danks’ customers."
The bidding company for Woolies and Lowes, known as Bidco "will seek to expand the business of Danks by adding new customers, increasing share from current customers and, if the opportunity arises, acquiring other hardware chains to be run either as company-owned or licensed stores."
"This is a continuation of Danks’ strategy, as outlined in its 2007/2008 Annual Report, of moving into direct ownership of large retail hardware operations.
"The first acquisition of this sort by Danks was Blue Mountains Hardware, a "Home Timber & Hardware" branded store, located in Katoomba, west of Sydney."
Bidco (Carboxy) said it intends to support the Danks name and its retail brands "Home Timber & Hardware", "Thrifty-Link Hardware" and "Plants Plus Garden Centres", and to continue to support the independent retailers who are customers of Danks, and to assist them to grow their business and improve their competitiveness through access to the benefits listed below, which will be available by virtue of Danks being integrated into the Hardware Joint Venture:
- Access to capital;
- Industry expertise regarding retail insights and strategies;
- Buying efficiencies available through increased volume;
- Expanded product range;
- Opportunities for global sourcing which will have potential supply and cost advantages; and
- Supply chain expertise to drive efficiency and quality improvements, and to ensure service and supply is leading edge.
"Bidco intends that the Danks business will benefit from sharing best practice facilities and resources with the Hardware Joint Venture," the bidder’s statement said.
"The Hardware Joint Venture will establish a network of destination home improvement stores that will enhance the efficiency of the integrated supply chain network and increase the buying volume, and hence the buying efficiencies, available to Danks and to the Hardware Joint Venture."
As well Woolies and Lowes said they intend that the Danks organisation structure will remain the same and Graeme Danks will have day-to-day responsibility for managing the Danks business and will retain Danks employees and management and to continue to use their expertise to grow and develop the business of Danks.
Danks employees will have access to the enhanced employee benefits and improved training and career development opportunities available through being a part of the broader Woolworths Group.
In yesterday’s down market, when it fell around 1.7%, or 76 points, Woolies shares rose five cents to $28.65.
