Hart bags nine ITM stores to build Carters chain

Billionaire Graeme Hart has snapped up nine ITM building supplies stores to bolster the Carters chain he inherited when he took over Carter Holt Harvey.

Although the acquisition is not sufficient to spark a shake-up in the competitive DIY market, observers say the move is a challenge to Fletcher Building's Placemakers chain and argue it may indicate Hart has greater ambitions for the Carters chain.

Hart acquired the stores - located mainly in the upper North Island - from their owner-operators. ITM is a network of privately owned stores, with combined sales of more than $500 million, joined in a buying co-op.

Before this deal Carters had more than 40 stores across New Zealand and around 20 per cent of the market, with similar sales to ITM.

One of the advantages of growing bigger is the gains Carter Holt could make from distributing more of the wood products produced by its mills.

At present around 50 per cent of Carter Holt's production for the local market is sold through Placemakers, the market leader with sales in 2005 of $956 million. If more volume were channelled through the Carters business, Hart would retain more of the profits in his own business.

Fletcher Building's shares yesterday fell 9c to $8.51. Its Placemakers division generates around 17 per cent of $5.5 billion sales and around 9 per cent of its $675 million operating earnings.

Meanwhile, others said Hart could be looking at a sector of the retail market ripe for consolidation. Although the industry is dominated by the larger chains, outlets such as Mitre 10 and Bunnings Warehouse - owned by Australian conglomerate Wesfarmers - are holding their own. An army of smaller outlets compete at the margin.

Hart's private company Rank declined to comment.

ITM national chief executive Gordon Buswell declined to comment on the implications of Hart's move but said the co-op was shrugging off the loss. "We have already re-established that volume with independent stores." Buswell said the industry and ITM were in rude health, posting sales ahead of last year despite talk of an impending slowdown.

"The industry, at this stage, is the busiest it has ever been," he said.

The move on ITM also suggests Hart's Rank group is reorganising every division of Carter Holt since he acquired the business at the start of this year for a total of $3.3 billion.

Yesterday the Commerce Commission cleared Global Forest Partners LP, which manages more than US$1.5 billion of trees worldwide, to bid for Carter Holt Harvey's forests.

The commission has also cleared Hancock Timber Resource Group, the world's biggest forest investment fund, to bid. The two timber groups had to seek competition approval because they already manage or own forestry businesses in New Zealand.

Hart put the forests, valued at just under $1.6 billion, up for sale earlier this year to pay debt and focus on more profitable parts of the business. He is also rumoured to be considering merging Carter's packing operations with those of Australian arch-rival Amcor.