woolworths moves into hardware, page-19

I've often wondered why this deal had attracted so little attention in relation to competition issues. When WES took over Coles, there were concerns over the fact that it had a garden section in K Mart as well as Bunnings. I'd have thought this was minor in comparison to Woolworths' plans. Maybe they'd have been better off just taking over Danks and then revealing their big box plans further down the track?

http://www.watoday.com.au/business/woolies-bid-for-danks-cast-in-doubt-20091016-h0y5.html

Woolies bid for Danks cast in doubtELI GREENBLAT
October 16, 2009 - 2:47PM .
Woolworths bid to break into the nation’s $24 billion hardware sector could be tripped up by the competition regulator after it raised a number of serious concerns relating to its a $87.6 million takeover bid for hardware retailer and independent distributor Danks.

In a document released this evening, the Australian Competition and Consumer Commission (ACCC) said it had concerns about the competition implications of the Danks takeover for the retail and wholesale sector.

‘‘The ACCC is concerned that in some local markets the proposed acquisition may be likely to result in a reduction in the level of competition between retailers in some markets, particularly between Woolworths ‘big box’ stores and retailers supplied by Woolworths/Danks, compared with the likely competitive position in the absence of the proposed acquisition,’’ it said.

‘‘This concern arises because the acquisition reduces the number of participants at the wholesale level by one compared with the situation without the acquisition. Without the acquisition, Woolworths would enter as a vertically integrated ‘big box’ retailer with its own wholesale operation, increasing the number of significant participants at the wholesale level from three (Bunnings, Danks and Mitre 10) to four (with the addition of Woolworths).

‘‘With the acquisition of Danks by Woolworths, the number of significant participants at the wholesale level does not increase, but stays at three (Bunnings, Mitre 10, and Woolworths).’’

Woolworths launched its bid for Danks in August as part of a multi-billion dollar joint venture with US giant Lowe’s to open a string of large hardware chains to compete with the popular Bunnings chain.

It is estimated Woolworths will spend at least $1 billion over the next four years on a home-improvement store network, with a target to secure more than 150 sites by 2014-15.

The ACCC intends to publicly announce its final view by November 11.