Metcash in talks to sell Franklins supermarkets

Posted by AFN Staff Writers on 11th November 2011

Wholesale giant Metcash today announced it is in the final stages of selling its newly acquired Franklins supermarket chain to Australian IGA Supermarkets.

Metcash Chief Executive Officer Mr Andrew Reitzer said the company had so far received over 200 expressions of interest to buy the supermarket chain and was looking forward to transitioning Franklins into the “right hands”.

Mr Reitzer said discussions with potential buyers of the Franklins supermarkets would begin on 21 November.

The process of acquiring Franklins supermarkets from Pick n’ Pay was delayed by the Australian Competition and Consumer Commission (ACCC) which brought legal action in the Federal Court of Australia against Metcash in December 2010.

The ACCC website says, “The ACCC took this action because it considered that the proposed acquisition was likely to result in a substantial lessening of competition through the removal of Metcash’s only real competitor for the wholesale supply of packaged groceries to independent retailers in NSW and the ACT”.

Metcash and Pick n’ Pay have consistently maintained that the acquisition would have little effect on competition.

In August 2011, Federal Court Justice Emmett found against the ACCC. In his reasons for judgment, Justice Emmett said, contrary to the ACCC’s view, that integrated supermarket operators (such as Coles, Woolworths and Aldi) do competitively constrain grocery wholesalers.

ACCC chairman Rod Sims said in a press release that the ACCC was “disappointed” with the Federal Court decision and the ACCC appealed to the Full Court of Federal Court on 9 September 2011.

Mr Sims said the ACCC was appealing the decisions for two main reasons:

  • First, because of the adverse effect of the proposed acquisition on independent supermarket retailers, consumers and competition in the NSW and ACT grocery sector. Metcash, with this proposed acquisition, will have an ability to increase prices and/or reduce service to independent supermarket retailers.
  • Second, because, if left unchallenged, the Court’s interpretation of some fundamental principles of merger analysis could have serious implications for the ACCC’s ability to block anti-competitive mergers and so protect consumers in the future.

On 11 September, Metcash gave notice to the ACCC that it would be going ahead with the acquisition.

The ACCC subsequently lost an application for an injunction to restrain the proposed acquisition before its appeal could be heard and decided.

The Full Court appeal was heard over three days from 24 October 2011 and the Court’s decision is still pending.