ACCC clears JB Hi-Fi to buy The Good Guys

The ACCC has approved JB Hi-Fi’s potential purchase of The Good Guys, in a blow to Gerry Harvey’s takeover hopes.

The Good Guys considering an IPO, says the ACCC.

Electronics retailer JB Hi-Fi has been given the all-clear by the competition watchdog to buy whitegoods retailer The Good Guys.

The decision comes after JB Hi-Fi (JBH) declared it was in preliminary discussions to acquire its $800 million retail rival in May, with the target simultaneously weighing an IPO.

The retailer today confirmed talks are still ongoing, with no formal bid seemingly on the table.

In declaring its decision, the Australian Competition and Consumer Commission said that while JB Hi-Fi has recently expanded into whitegoods retailing, it generally focuses on a different product set to that of The Good Guys.

“JB Hi-Fi has traditionally focused on selling consumer electronics, with stores located mostly in shopping centres or CBDs. On the other hand, the Good Guys has mostly focused on whitegoods and other home appliances, with stores generally located in home centres or similar locations,” ACCC chairman Rod Sims said.

“Other retailers such as Harvey Norman have a much higher degree of overlap with the Good Guys than JB Hi-Fi.”

A JB Hi-Fi store

Mr Sims had earlier flagged potential issues with any deal, telling The Australian the ACCC would scrutinise it carefully given the two companies appeared “quite close competitors”.

The ACCC admitted in a statement today the deal did pose some worries given JB Hi-Fi’s potential expansion in the home appliances sector, with the crossover in TV sales a particular focus.

Despite this, competition was deemed strong enough to withstand a combination of two retail sector heavyweights.

“JB Hi-Fi and the Good Guys are clearly in competition with each other to a degree,” Mr Sims said.

“(However), on balance, the ACCC did not consider that the acquisition would substantially lessen competition in any market.

“We considered that the combined company would continue to face strong competition from Harvey Norman and other existing retailers such as Betta, Retravision, Bing Lee and Radio Rentals.”

In response to the ACCC decision JB Hi-Fi said it has yet to make a decision on any formal offer for The Good Guys.

“JB Hi-Fi understands that The Good Guys are looking at a range of options including an IPO on the ASX,” the company told investors.

“JB Hi-Fi evaluates all possible opportunities against a range of factors and would only pursue an acquisition if it made compelling financial sense for its shareholders.”

Billionaire Gerry Harvey says his retail chain Harvey Norman had approached The Good Guys to look at its books as a stepping stone to making a possible takeover bid, but to date has been ignored and not allowed to conduct any due diligence.

Mr Harvey told The Australian he believed there “was nothing he could do” to stop JB Hi-Fi now making a takeover grab for the privately-owned The Good Guys.

“There is nothing I can do about this, the ACCC said they can take them over, I can’t stop it.

“The Good Guys wouldn’t give us the information to bid on their company, none, and we asked for it,’’ Mr Harvey told The Australian.

“Well, they (Good Guys) are a private company and they can do whatever they like . they obviously don’t like us and don’t want to be involved with us — at least we know who likes us and who doesn’t.’’

Mr Harvey said even if Harvey Norman did make a bid for The Good Guys, an offer that topped everyone else, they could still be knocked back, Mr Harvey said.

In May Mr Harvey told The Australian he was studying the implications of JB Hi-Fi tightening its grip on the nation’s $17 billion consumer electronics sector through a takeover of the privately owned Good Guys.

IBISWorld estimates The Good Guys has a 12.5 per cent slice of the domestic appliance market, while JB Hi-Fi has 13.9 per cent and Harvey Norman is the biggest player with 15.3 per cent.