Metcash is expanding its hardware sector presence with a $57 million bid for a 70 per cent stake in middleweight national chain Total Tools.
The agreement, which the Australian Competition and Consumer Commission has been reviewing since June 30, allows for the purchaser to buy the balance of the business within four years.
If approved, the 81-store network, which reported $555m in revenue last calendar year, would be held by the ASX-listed conglomerate’s Independent Hardware Group (IHG) division.
The acquisition would be paid for using part of a $330m capital raising undertaken three months ago.
Metcash’s offer provides Total Tools with a $35m debt facility to support growth plans.
Metcash to set Total Tools up like its other hardware businesses
As well as announcing it had entered a binding agreement with Total Tools Holdings, the store franchisor, Metcash today said it bought one company owned outlet outright, and intends to acquire an interest in more (story continues below).
This set up – with a mix of independent and joint venture shops – is how IHG operates other brands, which includes in the hardware space, Mitre 10, Home Timber & Hardware, Thrifty Link Hardware and Hardings Hardware.
Whether a Total Tools acquisition would negatively impact the prices and services of the other businesses, is something the ACCC is set to judge.
Having sought submissions until July 13, the government is expected to complete its review, which would give the green light to the deal, on August 27.
Bunnings is the national sector leader.
Metcash shares closed at $2.75 today – unchanged from a month ago.
The diversified company’s stable of brands also includes IGA, Cellarbrations and The Bottle-O.