Lining up against the Wesfarmers-led Coles/Bunnings group and the might of the combined Woolworths and US-based Lowes group that is planning to enter the hardware market next year through its acquisition of Danks, third-ranked Metcash will inject $55 million into the membership-based Mitre 10 chain of hardware stores.
Metcash, best known through its supplying of the IGA-branded stores, sees itself as the ‘white knight’ of small, independent hardware retailers. The $55m will get it 50.1% of Mitre 10’s shares.
“The injection of new capital by a strong and supportive shareholder will substantially strengthen Mitre 10 and enhance the ability of its customers to compete more effectively in the future,” the company said
The amount of equity invested by Metcash is based on estimated earnings for the financial year ending 30 June 2010 and estimated net debt at completion and may be adjusted following finalisation of Mitre 10’s audited accounts for the year ending 30 June 2010. The adjusted amount payable by Metcash will be based on actual 2010 earnings and actual net debt at completion.
Metcash will have the right to acquire the remaining 49.9% of the equity in the Mitre 10 Group following the finalization of Mitre 10’s audited accounts in either 2012 or 2013, based on an agreed multiple of earnings.
Mr Andrew Reitzer, CEO of Metcash, said: “We are delighted to have been selected as the preferred partner for Mitre 10, and believe we can add significant value to Mitre 10’s customers in an increasingly competitive marketplace.
“Our discussions with Mitre 10’s customers in recent weeks have confirmed that independent hardware operators strongly support an experienced, well capitalised wholesaler such as Metcash, being chosen as the long term partner for Mitre 10.
“We can become the ‘champion of the independent hardware retailer’ and help them lift their revenue and profit through Metcash’s strong brand management, logistics and merchandising skills developed over many years”, added Mr Reitzer.
The current chairman of Mitre 10 Australia Ltd, Lance Collins, will become chairman of the new entity and Mark Burrowes, chief executive of Mitre 10, will continue to lead the group.
“The synergy between our two companies is clear with an identical commitment to supporting independent operators,” Mr Collins said.
He said the Mitre 10 board had been through an extensive process to find a suitable partner and had decided to join Metcash, allowing it to continue operating as the only national hardware chain dedicated to independent retailers.
Source: T and L News