ACCC Approves for Coles to Acquire Five Supabarn Supermarkets
Wesfarmers announced that The ACCC approved Coles' restructured proposal to acquire five supermarkets from Supabarn
Owner of the supermarket giant Coles, Wesfarmers (ASX:WES) announced that The Australian Competition and Consumer Commission (ACCC) has approved for its restructured proposal to acquire five Supabarn supermarkets in the NSW and ACT regions.
Supabarn is a privately owned supermarket operator with nine stores operating in the ACT and NSW and two development sites. Apart from Coles and Woolworths, Supabarn is the only operator providing ‘full-line’ supermarkets that include a liquor section in the ACT region.
Coles Originally Proposed to Acquire Nine Supermarkets
Coles had originally proposed to acquire all nine supermarkets from Supabrarn. The competition watchdog had raised concerns over the proposal in September 2015, stating that the acquisition would most likely not result in a ‘healthy competitive’ environment.
In conjunction to the aforementioned concerns, Mr. Rod Sims, the Chairman of The ACCC stated that the regulator was “closely examining the effect of removing a supermarket chain with a differentiated offer from the market.” The regulator then conducted a review that focused mainly on two issues, which were the effect of the acquisition upon competition between supermarket chains in the Canberra region and the effect upon each of the individual local markets in which the Supabarn stores operate.
In response to The ACCC’s apprehensions, Coles restructured its proposal to acquire only five supermarkets in the Canberra Centre, Kaleen and Wanniassa in the ACT, and Five Dock and Sutherland in NSW.
Mr. Sims commented on the new proposal: “The deal has been restructured in a way that removed the most problematic stores, as well as two other stores of lesser concern. It also retains Superbarn as a supermarket chain after the acquisition is completed with Superbarn being free to compete under the Superbarn name.”
Solid Performance in 1H16
Wesfarmers recently reported its financial performance in the first half of FY16, stating that its supermarket segment showed improvements in revenue and EBITDA. The food and liquor business particularly experienced sales growth of 6%, underpinned by operational simplification and supply chain efficiencies.
Author: Kaivalya Kandarpa
Mar 10, 2016
Kaivalya is an equity analyst and a client advisor at Wise-owl. She specialises in fundamental and technical analysis for large and mid-cap companies. Having completed her bachelor's degree in Business Administration majoring in Finance, Kaivalya has a comprehensive understanding of international stock market movements. She tracks local and overseas markets and compiles analytical reports for various industries.