ferret's stock to watch: metcash limited

Ferret's Stock to Watch: METCASH LIMITED
08:43, Monday, 23 May 2005

Sydney - Monday - May 23: (RWE Aust Business News)
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COMPANY'S PROSPECTS HANGING ON TAKEOVER SUCCESS

OVERVIEW
********

Metcash Ltd (MTS), the leading independent grocery and liquor
distributor, is a stock with an element of danger at the moment as its
five-month talkfest is still trying to thrash a suitable merger with
Foodland Associated Ltd.

If the market is convinced there is no chance of a takeover
emerging there could be a serious selloff, giving some intrepid investors
a buying opportunity.

But at this stage Metcash shares have been pretty stable, mainly
due to a further extension of its bid from May 28 to June 4.

Metcash Ltd evolved from share and option schemes of arrangement
by Metcash Trading Limited (MTT), a marketing and distribution company
operating in the food and fast moving consumer goods industries.

MTT shares were suspended from trading on April 7.

Metcash has three business units - IGA Distribution, Campbells
Cash & Carry and Australian Liquor Marketers.

Metcash's letter to Foodland shareholders pointed out that the
company had substantially lifted both its cash and scrip offer.

It urged Foodland shareholders to accept the company's revised
offer of: $8.55 cash or 2.79 Metcash A shares; and 1 NZ share for each of
their Foodland ordinary shares.

Foodland shares on Friday sold 5c lower at $23.25, which is
moving closer to the Grant Samuel & Associates range of $24.86 to $27.33
after Metcash lifted its first offer.

The sticking point is that Metcash doesn't want the whole of
Foodland, only the Australian operations which are reportedly worth about
$1.1 billion.

Howewer, a NZ company called Progressive Enterprises has
expressed interest in taking over Foodland's New Zealand interests,
although the latter's board has knocked it back at this stage.

SHARE PRICE MOVEMENTS
*********************

Shares of Metcash on Friday eased 1c to $3.38. Rolling high for
the year has been $3.41 and low $2.28. Dividend is 14.3c a share to yield
4.23 per cent.

At the beginning of the month Metcash announced it had reached an
in-principle agreement with Australia's largest independent licensed
supermarket group, Ritchies Stores Pty Ltd (Ritchies IGA), and a majority
of its shareholders to acquire a 26 per cent equity stake in Ritchies IGA
from July 2005.

It is envisaged that the acquisition will be funded from
Metcash's existing cash resources.

Ritchies IGA operates 38 supermarkets in Victoria and NSW,
trading as Ritchies Supa IGA, and management of the group will remain
with the existing team while Metcash representatives will join the board.

The CEO of Metcash, Mr Andrew Reitzer, said "The acquisition of
26 per cent of Ritchies IGA will enable both of our companies to benefit
as a consequence of a closer alignment of business interests and
strategy.

"In addition, the investment will facilitate the longer term
retention of Ritchies as a key customer of IGA, and provide funding to
enable Ritchies to grow and expand.

"Our objective is to ensure the long-term viability of the
independent grocery business in Australia. In partnering with key IGA
retailers such as Ritchies, we are working to secure the market share of
independent grocers, constantly under pressure from the chains. This will
benefit all stakeholders in the independent sector," added Mr Reitzer.

Mr Fred Harrison, the CEO of Ritchies, said the partnership with
Metcash has enabled Ritchies to grow whilst competing effectively with
the two chains.

"This new level of our relationship will help us achieve our
growth objectives of an additional 25 supermarkets over the next five
years," Mr Harrison declared.

BACKGROUND
**********

Metcash Ltd was listed on the Australian Stock Exchange on April
8, 2005.

Metcash is currently one of the best-performing stocks on the
Australian market, a status that vindicates strategies put in place by
management since Metro Cash and Carry South Africa acquired control of
the business in 1998.

High service levels remain at the core of Metcash's success.

The company continues to focus on teamwork and staff training
programs for the benefit of employees, customers and stakeholders.

Metcash's choice of motto - "The Champion of the Independent
Retailer" - is well considered and a constant focal point on which
management and staff can draw.

The company's commitment to its employees at every level, clear
communication channels, regular briefings and an emphasis on training
programs has reinforced the core values of the company.

ENDS

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I don't hold MTT