Metcash buys Franklins supermarket chain in NSW

Australia’s largest independent grocery and liquor wholesaler, Metcash Trading Limited (Metcash), has announced it will acquire – subject to ACCC approval – the Franklins chain of 85 supermarkets, comprising 77 corporate stores plus supply to 8 franchised stores.

 

Metcash has entered into an agreement with Pick n Pay Retailers (Pty) Limited (Pick n Pay) of South Africa to acquire the shares of Interfrank Group Holdings Pty Ltd, the company that owns the Franklins business, from Pick n Pay for a consideration of approximately $215 million, to be paid on completion – expected by 30 September, 2010.

 

Metcash proposes to implement a store sale program upon completion to sell the stores to independent IGA retailers. Metcash will operate the stores in the intervening period while the store sale program is completed, which could take several months.

 

Metcash chief executive Andrew Reitzer said: “The IGA network will significantly improve its competitive position against the national chains in Australia’s largest grocery market, NSW, while growing the market share of Metcash supplied retailers in the state from 11 per cent to 17 per cent.

 

“Metcash expects the independent retailers who purchase the stores will lift each store’s performance through the successful combination of their own retailing expertise and through utilising the strength, services and support provided by Metcash, especially our national buying power, world-class supply chain and marketing and merchandising programs. These stores will be able to take advantage of our favourable arrangements with suppliers to achieve more competitive pricing deals. Consumers and independent retailers in NSW are big winners from this deal,” he added.

 

The acquisition is expected to add more than $500 million per annum of wholesale sales to Metcash’s business. The uplift in the first full year after selling the stores is expected to be between 1.5 cents and 2.0 cents per share. The transaction is subject to, among other things, ACCC approval and will be funded from existing Metcash bank facilities.

 

MREC HERE

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