The board of retailer Foodland has given its backing to the plan by supermarket Woolworths and grocery wholesaler Metcash to takeover the company.
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Metcash said today (Wednesday) that it had reached agreement to acquire Foodland Associated Limited’s Australian business excluding 19 Action stores and 3 Action development sites which will be acquired by Woolworths as a package together with its purchase of FAL’s New Zealand operations.
Metcash gets FAL’s West Australian Franchise and Supply division, Action Retail division – excluding Woolworths Action Stores, and all other FAL Australian assets.
“Our objective from day one was to acquire the Australian Wholesale and Retail assets of Foodland. Excluding a small basket of retail stores, for which we have been well compensated, we have achieved our objective. We were always the most logical purchaser for these assets,” said Metcash CEO Andrew Reitzer
On the purchase of Woolworths Action Stores by Woolworths, Reitzer said, “these stores represent 12% of the total revenue we would have achieved had we acquired 100% of FAL Australia. FAL wanted to announce a composite transaction for the entire company, and we understand that Woolworths’ offer for Foodland New Zealand was predicated on gaining some retail (Action) stores, therefore we negotiated with Foodland a A$270m (US$205m) reduction in our cash purchase price.”
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By GlobalDataMetcash has adjusted downwards its current offer price for the FAL Australia business of $1,050m in cash or $1,154m in Metcash shares, for the impact of excluding the Woolworths Action Stores. Metcash is now offering $780m in cash (or $6.61 per FAL share) or $859m in Metcash shares (or $7.29 per FAL share)1.
According to FAL this means, with the Woolworths purchase included, that the total offer is valued at between $3.280bn and $3.384bn (depending on whether FAL shareholders elect to receive cash or scrip from Woolworths and Metcash).
Documents are expected to be sent to FAL shareholders by FAL around the end of July with the acquisition becoming effective around the end of August. In the interim Metcash will be working proactively on integration issues, divesture planning for Action stores and other matters. Metcash will continue to advise the market appropriately of any material developments.
“We are pleased that we have been able to come to an arrangement that delivers not only value, but also certainty to FAL shareholders for both the Australian and New Zealand businesses, said FAL chairman Len Bleasel.
