The Australian Competition and Consumer Commission said it will not oppose Metcash’s acquisition of a 70 per cent stake in Total Tools Holdings, the franchisor of the Total Tools Network.
The consumer watchdog said there has been a lot of activity in the tool industry this year so the proposed acquisition would unlikely result in any vertical competition issues of concern.
The wholesale distributor said last month that it is in the final stage of negotiations to acquire 70 per cent of Total Tools, a national franchise targeting tradespeople, for approximately $57 million.
Under the proposal, Metcash would provide Total Tools with a $35 million debt facility to support its growth plans and the potential future acquisition of interests in a select number of stores. Over time, Metcash would look to have a mix of store ownership, including both independently owned and joint-venture retail stores.
The deal, which is for Total Tools’ franchisor operations and one company-owned store, would give Metcash a clear pathway to acquire the remaining 30 per cent stake in Total Tools within the next three years.
Metcash is a wholesaler and retailer of hardware and home improvement products through its Independent Hardware Group (IHG) division. IHG’s retail stores include Mitre 10, Home Timber & Hardware, Thrifty-Link Hardware, True Value Hardware and Hardings. Total Tools is a specialist retail supplier of tools and equipment.
The ACCC said that IHG stores compete more closely with multi-category hardware stores, such as Bunnings, while Total Tools competes more closely with other tool specialists such as Sydney Tools, as well as Bunnings.
The ACCC said at a national level, a combined IHG and Total Tools would still face strong competition from Bunnings and the specialist retail suppliers of tools and equipment.
“We saw that generally Mitre 10 focuses on the DIY customer and those looking for convenience, while Total Tools mainly attracts trade customers because of their extensive range of trade quality products and specialised staff,” said ACCC Chair Rod Sims.
“We have seen a lot of activity in the tool industry this year. Bunnings is the clear market leader, and with IHG increasing its footprint, any further consolidation of the tool market at a national, state or local level will be scrutinised closely,” Sims said.