Australia blocks Pick n Pay's exit strategy

Australia’s competition watchdog has stopped South African grocer Pick n Pay’s sale of Franklins supermarket chain, to prevent creating a monopoly for would-be buyer Metcash.

The Australian Competition and Consumer Commission said the Aus$215-million sale of the chain would give Metcash a monopoly on grocery wholesaling in New South Wales.

Pick n Pay, which is selling the chain so it can focus on pushing further into fast-growing Africa, will likely have to sell the business piecemeal, delaying its pull-out from Australia, said a Johannesburg-based analyst, who declined to be named.

“Plan B of selling the individual stores to independent supermarkets is not as attractive because it may be a long process, and the net proceeds might not be as good,” the analyst said.

With the sale blocked, Pick n Pay might have to resort more to borrowing for its expansion drive, driving up costs, the analyst said.

Pick n Pay has stepped up its expansion into Africa, focusing on fast-growing countries such as Mozambique and Zambia.

Africa, which is expected to double its population to about two-billion people by 2050, is seeing a rise in personal incomes and the emergence of a middle class, increasingly making the world’s poorest continent a target for retailers.

WalMart the world’s biggest retailer, is in talks to buy a controlling stake in South African discount retailer Massmart.

Pick n Pay’s chairman, Gareth Ackerman, said the firm was disappointed with Australia’s decision.

He said the commission had been misled by “unnamed parties” who said they were very interested in buying the Franklins business.

“Pick n Pay has received no credible offer for the business from any party,” he said.

Metcash said it would review the reasons and consider its options.

Pick n Pay shares had slipped 1,2% to R48,40, underperforming a 0.3% decline in Johannesburg’s Top-40 index of blue chips.

Shares in Metcash ended little changed.—Reuters

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