Metcash is nearer to adding the Woolworths wholesale hardware business to its Mitre 10 chain.
The consumer watchdog, the ACCC (Australian Competition and Consumer Commission), says it won’t oppose a bid from Metcash to acquire rival hardware wholesaler Home Timber & Hardware from Woolworths.
Metcash shares bounced 5% higher in early trade. A short time ago, they were up 1.4% to $2.10. Woolworth shares added 1.4% to $22.83.
Other bidders for Home Timber & Hardware are reported to include Anchorage Capital Partners and the Blackstone Group. Analysts say the business is worth about $250 million.
Metcash met the ACCC’s initial concerns by agreeing to a court undertaking that it would not restrict independent hardware stores in the network from acquiring products from non-Metcash sources.
“The decision not to oppose this bid was finely balanced and one the ACCC has given deep consideration to,” says ACCC Chairman Rod Sims.
“We looked at the competition issues surrounding Metcash acquiring its only rival full-service wholesaler. We received significant feedback from independent retailers. The majority were supportive of the bid, but we also took on board feedback from others who expressed some genuine concerns.”
A key factor in the ACCC approval was the presence of a large competitor, Bunnings, a profitable arm of Wesfarmers, in the market.
In February, Woolworths posted a loss of $972.7 million in the first half of the financial year, its first for more than 20 years, driven by a $1.9 billion write down in the value of the troubled Masters retail hardware business.
Masters, which has been losing money since its launch in 2011 as a competitor to Bunnings, is owned separately by Woolworths to its Home Timber & Hardware business.
Home Timber and Hardware, which is mainly a wholesale business but with some direct retail outlets, had sales last year of $937 million, a rise of more than 20%, on strong growth in the wholesale market.