A potential merger of the Mitre 10 and Home Timber and Hardware (HTHG) brands is one step closer after the competition watchdog today revealed it will not oppose Metcash’s bid to buy the Home Timber brand from Woolworths.
Metcash had previously provided an undertaking to the Australian Competition and Consumer Commission in response to concerns from independent hardware retailers that an acquisition would affect their ability to purchase products from non-Metcash sources.
Metcash committed to not restricting independents retailers from doing so, and said it would not favour its own stores over other independent stores located in the same area.
Mitre 10 and HTHG are full-service wholesalers to hundreds of independent retailers in the hardware and home improvement sector and a possible merger of the two businesses had raised competition concerns for the ACCC.
The ACCC said this morning it has accepted the court-enforceable undertaking from Metcash after consulting with industry about the terms of the undertaking and the affect the proposed acquisition would have on the hardware sector.
“The decision not to oppose this bid was finely balanced and one the ACCC has given deep consideration to,” ACCC chairman Rod Sims said in a statement this morning.
“We looked at the competition issues surrounding Metcash acquiring its only rival full-service wholesaler. We received significant feedback from independent retailers. The majority were supportive of the bid, but we also took on board feedback from others who expressed some genuine concerns.”
Sims said the presence of Bunnings as a “large, powerful retailer” in most markets will “indirectly constrain Metcash’s wholesale operations” and this was a factor the ACCC also considered when making its decision.
“We decided to accept Metcash’s undertaking, which should provide independent retailers with the ability to bypass Metcash by using buying groups or negotiating directly with manufacturers. This should also facilitate entry by any new wholesaler that may emerge,” Sims said.
“Metcash has also undertaken not to discriminate against independent hardware retailers in favour of its own stores.”
Andrew Ledovskikh, senior industry analyst at IBISWorld, previously told SmartCompany if the Metcash acquisition was to go ahead, it would involve a “rejigging of the market share” in the hardware retail market, considering Woolworths is also planning to sell or close the Masters business.
“We think that Bunnings and Metcash will look to absorb most of Masters’ sales,” Ledovskikh said.
“It is yet to be seen if Metcash can challenge Wesfarmers’ market share, they’ve already fended off the attempt by Masters.
“It’s uncertain whether or not Metcash can mount a better attempt than Masters, but they can learn from them.”