Metcash to digest Franklins logistics after court win


Metcash’s supply chain will continue swallowing the load of 80 NSW and ACT more stores, now that the full bench of the Federal Court has rejected Australian Competition and Consumer Commission’s application to prevent Metcash from acquiring the Franklins supermarket business. In doing so, the Federal Court held that state markets were part of a broader national market, the point that Metcash has always argued. “We will continue the process of seeking and reviewing expressions of interest for the stores, which are being sold to independent retailers,” Metcash CEO Andrew Reitzer says.

By Rob McKay | December 1, 2011

Metcash’s supply chain will continue swallowing the load of 80 NSW and ACT more stores, now that the full bench of the Federal Court has rejected Australian Competition and Consumer Commission’s application to prevent Metcash from acquiring the Franklins supermarket business.

In doing so, the Federal Court held that state markets were part of a broader national market, the point that Metcash has always argued.

"We will continue the process of seeking and reviewing expressions of interest for the stores, which are being sold to independent retailers," Metcash CEO Andrew Reitzer says.

"Backed by Metcash, and in the hands of independent retailers, the stores will enhance competition against the national self-supply chains."

Metcash started looking for buyers on November 11, having spent $189.3 million on the purchase and taking on $30.3 million in Franklins debt.

It has already integrated produce logistics for Franklins and will continue the process for frozen and chilled goods next month and dry goods in February, it says in its half yearly report released yesterday.

This will be aided by its 92,000 sq m Huntingwood, NSW, grocery distribution centre, which consolidates its Blacktown and Silverwater warehouses and is now operational and "ready to accommodate Franklins volumes".

While reporting a fall in fisrt half profit to $94.4 million, from $110.2 million in the previous first half, Metcash’s grocery distribution business, IGA>D, saw sales rise 1.7 percent in that time to $3.69 billion.

Questions will be asked about why the ACCC pursued a course that will see it pay out an estimated $20 million in legal costs based on an argument that the full bench described as a position where
"speculation
was heaped on speculation".

Its strategy has been under question for some time.

"The ACCC will closely examine the judgment before commenting further," ACCC chairman Rod Sims says.

The ACCC filed an appeal on September 9 against the Federal Court’s initial judgment dismissing the ACCC’s Metcash injunction.

The appeal was heard in Sydney in late October and judgment was handed down yesterday.

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