Metcash mulls automotive options BRIDGET CARTER & GRETCHEN...

Metcash mulls automotive options

• BRIDGET CARTER & GRETCHEN FRIEMANN - THE AUSTRALIAN
• 11 JUN, 12:50 AM

Metcash may be set to accelerate plans to sell its automotive division, with sources suggesting the struggling grocery wholesaler could be facing greater urgency to buy up a number of IGA supermarkets from franchisees.
As the company prepares to report its numbers on Monday, some are questioning whether Metcash should pursue a trade sale of its automotive business rather than an initial public offering so that funds could be secured sooner.
It is understood Metcash could be considering using the money to purchase stores from some of its franchisees, which are struggling to turn a profit with their IGA supermarkets.
Metcash has guaranteed a number of the IGA leases from its balance sheet, placing the company under increasing financial pressure should they be unable to pay their rent.
Others believe funds could be used in an attempt to purchase a fruit and vegetable retailer such as the privately owned Harris Farm Markets — which Metcash has tried to purchase before — in a desperate move to fend off rivals.


The bulk of Metcash’s earnings come from supplying groceries to the 1365 independent supermarkets operating under the IGA brand, some of which Metcash part owns.
Those operators are being hard hit by the growth in market share by upcoming competitors Aldi and Costco.
Aldi is now ramping up its operations in Western Australia and South Australia.
Compounding the problems for Metcash is the potential arrival of German supermarket discounter Lidl, which has taken out trade marks in Australia for hundreds of grocery items, as revealed by The Australian today.
The latest speculation on Metcash comes as some sources say potential suitors have recently been encouraged to make a play for all of the $1 billion supermarket wholesaler. However, there are thought to be few buyers for the business, with many describing it as one with a model that creates challenges growing earnings.
Almost $200 million was wiped from its market value this month when it flagged $640m in writedowns and plans to suspend its dividend.