Woolworths is threatening to torpedo the A$3.3 billion ($4.8 billion) tripartite agreement to carve up Foodland Associated with Metcash Trading if it doesn't get all of the 22 Action retail stores that were part of the deal, The Australian newspaper reported today.
Yesterday, it was disclosed the agreement to carve
up Foodland is conditional on Woolworths acquiring control of all 22 of the Action stores. That would require the consent of the landlords of all of the 22 Action stores.
The documents note that if the condition is not satisfied, "Woolworths will be able to determine whether or not the acquisition of Foodland by Woolworths and Metcash will proceed".
The Australian Consumer and Competition Commission (ACCC) last month stated its preliminary view that the acquisition of eight of the Action stores (six in Western Australia and two in Queensland) would be likely to substantially reduce competition in those markets.
The ACCC is seeking comment and expected to make a final decision by mid-October.
The Australian said at the time of ACCC's "bombshell", Foodland and Metcash showed no concern and there were claims that the tripartite agreement did not contain any condition that the purchase of the 22 stores was subject to ACCC approval - that is, Woolworths assumed the risk.
"It's now clear that was not the case," the paper said.
Metcash initially bid for all Foodland but it never wanted the New Zealand chains -- Woolworths, Foodtown and Countdown -- which were to be separately listed on the ASX.
Foodland then negotiated a deal under which Woolworths would buy Foodland NZ and 22 of the Action stores for A$2.5 billion and Metcash would buy the Australian wholesale business minus the 22 stores but would knock A$270 million off its offer price.
If the Woolworths side of the deal fails to proceed, Foodland will still be demerged and the NZ business will be listed on the ASX and NZX under the name Progressive Enterprises Holdings.
If Woolworths is unable to buy the Action stores, Metcash may bid for the stand-alone Australian business including all 69 Action stores. Woolworths would then have to decide whether to bid for the NZ business, and it may find that there could be competitors now that it would be a stand-alone business, the paper said.
- NZPA
