Metcash buys Franklins to convert to IGA supermarkets

Metcash, owner of IGA supermarkets and Australia’s largest independent grocery and liquor wholesaler, will acquire the Franklins supermarket chain for $215 million.

Metcash FranklinsMetcash plans to buy the 85 Franklins supermarkets, comprising 77 corporate stores plus supply to 8 franchised stores in order to convert the Franklins branded stores into IGA supermarkets in order to bolster Metcash’s position against Woolworths and Coles.

Metcash has agreed to terms 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 which owns the Franklins supermarket chain.

Franklin supermarkets will be placed up for sale to independent retailers by Metcash in keeping with the grocery wholesaler’s IGA supermarkets business, with Metcash continuing to operating the Franklins stores over the coming months while the sale process is undertaken.

Metcash Chief Executive, Mr Andrew Reitzer believes by acquiring Franklins Metcash will grow its share of the NSW grocery market to 17 percent up from 11 percent currently.

“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”

“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.

Last month Metcash Limited posted a record profit up 12.4 percent from $227.6 million for the year.

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