GROCERY wholesaler Metcash Trading has pledged to sell all of the Action supermarkets across Australia to independent owners should it succeed in its takeover bid for Foodland.
Metcash has established a $250 million banking facility so that it can assist independent retailers to buy the 81 Action stores in WA (38) and the eastern States (43).
Managing director Andrew Reitzer said Metcash intended to remain a specialist wholesaler, in contrast to Foodland which combines wholesaling and retailing.
“There is a fundamental differ-ence in the business model,” he said.
Metcash announced this week it planned to launch a takeover offer for Foodland.
It intends to retain Foodland’s Australian business, which it values at $846 million, and transfer the New Zealand business into a new company that would be owned by existing Foodland shareholders.
The takeover has led to a sharp spike in Foodland’s share price to $24.50 this week, up from $19.21 before the offer was announced.
Metcash’s share price has also risen solidly, up by 40 cents to about $3.35 per share, after completing a $270 million share placement this week.
This is unusual, since companies launching a takeover and raising capital are usually sold off, and indi-cates market support for its strategy.
The key driver behind the takeover is Metcash’s desire to boost the size of its business and achieve greater efficiencies in its wholesale operation.
Foodland recognises the same commercial logic, and has been having discussions with South African company Metoz, which controls Metcash, with Metoz’s major shareholders and with Metcash itself.
Foodland managing director Trevor Coates said the takeover proposal “is surprising given the extent of the recent detailed and confidential negotiations we have been having”.
Metcash said Foodland had gone as far as considering a $3.30-a-share takeover but it refused to allow Foodland to proceed to a ‘due diligence’ assessment of its business.
“Providing a major competitor with commercially sensitive information would be potentially damaging,” Metcash said in a statement.
The proposed sale of the Action stores, which mostly compete head-to-head with Coles Myer and Wool-worths supermarkets, would present a significant challenge, according to independent retailers in Perth.
They questioned the leasing terms that major shopping centre owners would demand from independently-owned Action super-markets, and were also concerned that independent owners would be more susceptible to aggressive competition.
Mr Reitzer said Metcash would not necessarily sell Action stores to the highest bidder, preferring to focus on the experience and business plans of bidders.
