“Hardware group, Mitre 10, staged its annual convention on 23 September 2008. The organisation’s CEO, Bernie Bicknell, claimed that in the past 12 months, a lack of funds prevented the company from purchasing about half a dozen strongly performing stores. Bicknell reaffirmed that Mitre 10 is considering options such as an outright trade sale or a capital injection”

Well I believe it may well be Metcash who is the preferred bidder or injector. The complex franchise structure of Mitre 10 is proving a bit too much of a challenge for the Corporate Heads at Woolworths and they are getting cold feet. Without ultimate control of the entity they think it will be too hard to turn around this loss making network. Metcash on the other hand has the buying experience and understands the challenges of dealing with individual owners at store level.

The numbers being talked about are between $730m to $1billion for an outright purchase but I think this is the most unlikely outcome. A capital injection into the business by Metcash and management and buying integration seems the best outcome for all parties.

On another front the ACCC has woken up to the fact that Wesfarmers‘ purchased five Mitre 10 stores over the past 2 years. This must have come from them sniffing around the Mitre 10/Woolworths talks. Anyway they may request that Wesfarmers divest these stores in the near future.

Watch Singapore for the next move in Woolworths’ expansion!

Tim

Mitre 10 has been struggling for the past decade to have an impact in the Hardware channel, particularly in metropolitan areas. The Australian Financial Review has reported that Mitre 10 and Woolworths are in discussions regarding a capital injection or outright purchase of entity.

The AFR also indicates that Mitre 10 will be holding a shareholders meeting during its National Convention next week on the Gold Coast. With the vast majority of shareholders in attendance this is an ideal opportunity to present a restructure or buyout proposal.

Hardware should not pose any ACCC issues for Woolworths as this is one of the few areas that WOW do not participate in in the Australian market.

Tim