Metcash is buying the Home Timber & Hardware Group from Woolworths to create a combined hardware chain with turnover of $2 billion and a national network of 1800 stores.
The $165 million purchase of Australia’s third largest retail hardware chain will add about $970 million a year in sales to Metcash’s Mitre 10.
The deal creates a clear number two player, behind the Wesfarmers-owned Bunnings with $11.5 billion in revenue, in the $28 billion Australian hardware market.
Last month the consumer watchdog, the ACCC (Australian Competition and Consumer Commission), announced it wouldn’t oppose a bid from Metcash for Home Timber & Hardware.
Metcash says the purchase strengthens its existing independent hardware network and increases the weighting of its business to trade customers.
Woolworths shares today went into a trading halt ahead of an announcement about the process to dispose of its hardware business. Still to come is the disposal of the Masters chain.
The acquisition by Metcash, also the operator of IGA supermarkets, a competitor to Woolworths, will be funded through an institutional equity placement of $80 million and $85 million in debt from existing facilities.
“Both Mitre 10 and HTH are passionate about supporting independent retailers,” says Metcash CEO Ian Morrice.
“This increased scale, together with the opportunity to realise significant efficiencies, will enable us to be more competitive and deliver a better outcome for both our hardware retailers and their customers.”
Home Timber & Hardware Group is an integrated hardware wholesaler and retailer with 1,200 stores in its network and retail brands including Thrifty-Link, Hardings and Hudson Building Supplies.
The national store network is made up of 43 company-owned stores, 363 bannered independent stores and an additional 865 unbannered stores.