Metcash has been given the OK by a key regulator for its rumoured acquisition of Woolworths’ Home Timber & Hardware (HTH), setting up a merger between its Mitre 10 network and the creation of a viable challenger to Bunnings, the sector leader owned by Wesfarmers.
The Australian Competition and Consumer Commission announced yesterday that it would not oppose Metcash’s bid for HTH after the wholesaler accepted an enforeceable undertaking to ensure equitable treatment of all members (store owners) of the merged network.
Market and media reports have suggested Metcash has offered around a quarter of a billion dollars for HTH, and may now be readying a cash call to shareholders and big investors for up to $200 million of that figure.
Metcash confirmed in a short statement to the ASX after the ACCC”s announcement, that “it has been participating in the process for the sale of the Home Timber & Hardware Group being conducted by Woolworths Limited.
"Metcash notes the ACCC’s decision published today that it will not oppose Metcash’s proposed acquisition of the Home Timber & Hardware Group.”
"Metcash continues to participate in the sale process being conducted by Woolworths, but can give no assurance at this stage on the outcome of that process, including whether Metcash will be selected as the preferred bidder, or whether binding documents for the proposed acquisition will be agreed, executed and exchanged,” the statement yesterday concluded.
Fairfax Media reported yesterday “Bids for the HTH business as well as Woolworths’ disastrous Masters home improvement business are being scrutinised by the supermarket giant, with insiders suggesting private equity giant Blackstone has submitted an offer for both the hardware businesses, and Charter Hall has made a pitch for the Masters operation.
“Former Dick Smith owner Anchorage is also interested in HTH but sources close to the private equity group said it was unlikely to be able to trump Metcash’s bid."
ACCC chair Rod Sims said in the ACCC statement the decision not to oppose the bid was “finely balanced and one the ACCC had given deep consideration to”.
“We looked at the competition issues surrounding Metcash acquiring its one rival full-service wholesaler," Mr Sims said.
He said the majority of retailers were supportive of the bid but Mr Sims said he also took on board the genuine concerns of opponents.
"Bunnings is a large, powerful retailer that is present in most local markets, which will indirectly constrain Metcash’s wholesale operations – a factor we also took into consideration," Mr Sims said.
The ACCC said it had considered responses from a broad range of hardware businesses to the undertaking, its ability to enforce it and. ultimately, the impact of the proposed acquisition on the multi-billion dollar hardware industry.
“We decided to accept Metcash’s undertaking, which should provide independent retailers with the ability to bypass Metcash by using buying groups or negotiating directly with manufacturers. This should also facilitate entry by any new wholesaler that may emerge,” Mr Sims said.
“Metcash has also undertaken not to discriminate against independent hardware retailers in favour of its own stores.”
He said an independent auditor, who will report to the ACCC, will ensure Metcash is meeting its obligations outlined in the undertaking. Metcash will also be required to give retailers plain-English information on its obligations. “Retailers can contact the ACCC if they have concerns about Metcash’s compliance with the undertaking,” Mr Sims said.
"Retailers trading under the Home Timber & Hardware, Thrifty-Link, True Value Hardware or Mitre 10 banners can decide to leave those brands and establish themselves as an unbannered, independent retailer. The undertaking prevents Metcash from ‘locking out’ existing or new wholesalers from supplying those retailers,” the ACCC chairman added.
Metcash shares rose 2.4% to $2.12 yesterday.
