Metcash in binding agreement for 70pc of independent hardware chain Total Tools Holdings

Metcash confirms binding agreement to acquire 70 per cent of independent hardware chain Total Tools Holdings.

Grocery, liquor and hardware wholesaler Metcash confirmed it has entered into a binding agreement to acquire 70 per cent of independent hardware chain Total Tools Holdings for $57m

Grocery, liquor and hardware wholesaler Metcash confirmed it has entered into a binding agreement to acquire 70 per cent of independent hardware chain Total Tools Holdings for $57m as first announced last month when it unveiled it had sought the controlling stake in the professional tool firm.

The terms of the transaction are consistent with those disclosed in Metcash’s announcement on June 22 and will require approval by the Australian Competition and Consumer Commission, which is asking for submissions from industry players on the competitive impact of the proposed tie-up.

Total Tools is the franchisor to the largest tool retail network in Australia with 81 bannered retail stores nationwide, and has been operating for over 30 years targeting professional tradespeople who require high quality tools for commercial use.

The retail store network generated sales of around $555m for calendar 2019 and will help Metcash lower its exposure to the grocery sector where it still generates around two-thirds of its earnings.

Through the acquisition, Metcash will acquire the Total Tools franchisor operations and one company owned store. Consistent with the approach in the Metcash hardware wholesale pillar, Metcash says it will look to have a mix of independently owned and joint venture retail stores.

Metcash will provide Total Tools with a $35m debt facility to support its growth plans and the future acquisition of an ownership interest in a select number of stores.

The acquisition structure includes a pathway for Metcash to acquire the remaining 30 per cent stake in Total Tools within the next four years by way of put and call arrangements.

Metcash chief executive Jeff Adams said he was delighted to have Total Tools join the Metcash Group.

“The acquisition of Total Tools enhances Metcash’s position in the hardware market which will benefit independent retailers in both Total Tools and the independent Hardware Group, and aligns with our purpose of “Championing Successful Independents”.

In April Metcash raised $300m from institutional investors to help fund new growth initiatives.

“The acquisition is being funded out of existing cash reserves. The equity raising in April strengthened our balance sheet and provided us with the flexibility to execute on strategic acquisitions such as Total Tools,” Mr Adams said.