Pick n Pay reveals Franklins sale back-up plan

Posted by Nicole Eckersley on 12th October 2010

Franklins supermarketFranklins today revealed that its parent company, South African based Pick n Pay, has begun preparations to sell its stores via tender individually, or in groups, in the event that the ACCC blocks its planned sale to Metcash.

Pick n Pay said it would work with the ACCC to secure approval of the proposed sale as a preferred option, and said it was confident of its arguments to persuade the ACCC to approve the transaction.

At the time of the sale, Metcash announced plans to onsell on the acquired Franklins supermarkets to independent retailers, under the IGA brand.

The ACCC released a statement on 22 September calling for further comment on the proposed acquisition, with a decision expected on 11 November.

“Following the strategic review announced earlier this year, Pick n Pay took a decision to exit the Australian market. Our preferred option to achieve that exit is through the previously announced sale of Franklins to Metcash,” said Mr Gareth Ackerman, the Chairman of Pick n Pay.

“While our first priority is to complete the sale to Metcash, given the issues raised by the ACCC it is prudent to put in place our alternative exit strategy in the event the ACCC does not approve the sale to Metcash.

“The decision to sell Franklins was not taken lightly. Without the benefits of scale in the market and in the face of unprecedented discounting by Woolworths and Coles we consider it essential to commence this process immediately as any further delay in selling the business would not be in the best interests of our shareholders, Franklins employees, suppliers and other interested groups.

“We have been encouraged by Metcash’s reports of the strong interest in acquiring Franklins stores since the proposed sale to Metcash was announced in July. While the Franklins business as a whole has not generated an acceptable return on capital employed, Franklins stores individually have strategic value to existing grocery operators within Australia, including but not limited to independent retailers supplied by Metcash,” he said.

Pick n Pay said it expects to receive initial offers for the stores and brands by 26 October 2010. In conjunction with its advisors, Pick n Pay said it will then assess and progress offers received for stores and brands so that it can move to complete the alternative exit strategy in a timely fashion, should the proposed sale of the Franklins business to Metcash not proceed.