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Metcash’s new acquisition plans

Metcash is looking to extend further into hardware, announcing it’s in the final stages of talks to acquire a 70% stake in leading tool retailer Total Tools.

The proposed $57 million deal would include Total Tool’s franchised operations and one company owned store. The wholesaler has also said it has a ‘clear pathway’ to acquire the remaining 30% over the next three years. It would have a mix of store ownerships, including independently owned and joint venture retail stores under the deal.

Total Tools is a franchiser to the largest tool retail network in Australia and has 81 bannered retail stores. The business, which has been operation for 30 years, services professional tradespeople and last year recorded $555 million in sales.

Metcash would also provide Total Tools with a $35 million loan, which would support its growth plans and the potential future acquisition of interests in select stores.

In a statement to the ASX announcing the proposal yesterday, Metcash said the acquisition would bolster their plans to become the leading supplier to independents and strengthen both their own and Total Tool’s existing networks.

It would also provide Metcash with a “more balanced” mix of earnings and result in significant value creation opportunities and synergies, they said.

The proposed acquisition is subject to ACCC approval and final negotiations.

Metcash has also reported a 2.9 per cent year-on-year increase in revenue in the 12 months leading to April, 2020, rising to $13 billion, or $14.9 billion when also accounting for charge-through sales. The positive results were driven largely by food and liquor sales and come despite the wholesaler losing supply deals with Drakes Supermarkets and 7-Eleven.

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