Published 2 July 2010
Metcash Trading Ltd, Australia’s largest independent grocery & liquor wholesaler, said yesterday it would acquire the Franklins chain of 85 supermarkets in New South Wales – 77 stores plus supply to 8 franchised stores from Pick n Pay Retailers (Pty) Ltd of South Africa.
Metcash entered into an agreement yesterday to acquire the shares of the Franklins business owner, Interfrank Group Holdings Pty Ltd, for $A215 million, to be paid on completion – expected by 30 September. Metcash will use existing bank facilities.
Metcash chief executive Andrew Reitzer said the company proposed to sell off the individual stores to independent retailers, the same way it operates the Metcash business. This would increase the market share of Metcash-supplied retailers in New South Wales from 11% to 17% and significantly improve the independent grocery network’s competitive position against the national chains.
He expected the acquisition to add more than $A500 million/year of wholesale sales to Metcash’s business.
Metcash said when it released its annual result on 1 June it increased wholesale sales for the year by 4.9% to $A11.5 billion, grew ebita by 8.6% to $A415.4 million, increased operating cashflow by 18.8% to $A294.7 million, increased profit after tax (before non-recurring item) by 8.5% to $A238.4 million and grew underlying earnings/share by 8.4% to A32c.
It March, Metcash acquired a 50.1% stake in the hardware wholesaler & marketer of the Mitre 10 hardware store brand in Australia, with the right to acquire the remaining 49.9% in 2012 or 2013.
Mr Reitzer said the wholesaler to the 440 independently owned Mitre 10 & True Value stores in Australia – separate from the Mitre 10 business in New Zealand – posted wholesale revenue of around $A850 million/year and had just completed a strategic & operational review of the business. He expected Mitre 10 to focus on improvements in the supply chain.
The Metcash business began in South Africa in 1968 and spread through Africa & internationally. It bought 72% of Davids Ltd in Australia in 1998, then sold its South African & African operations to management in 2004, retaining its stake in the Australian businesses, which traded as IGA Distribution, Campbell’s Cash & Carry and Australian Liquor Marketers.
Metcash grew in 2005 by buying the Australian operations of Foodland Associated Ltd. Woolworths Ltd of Australia bought the New Zealand operations, Progressive Enterprises Ltd.
The Franklins business Metcash is buying now is the remains of what was a much larger retail business owned by Dairy Farm International of Hong Kong. Metcash bought some of it in 2001.
6 December 2004: Metcash proposes Foodland breakup with ASX listing for NZ business
Want to comment? Go to the forum.
Attribution: Company release, story written by Bob Dey for the Bob Dey Property Report.