Metcash is moving forward with its acquisition of 70 per cent of Total Tools, a national franchise targeting tradespeople, for approximately $57 million.
The wholesale distributor, which already operates in the hardware category through its Mitre 10 and Home Timber & Hardware retail brands, first announced plans to take over the Total Tools business in June and has now entered into a binding agreement to do so.
The agreement will see Metcash acquire the Total Tools franchisor operations and one company-owned store, with a clear pathway to acquire the remaining 30 per cent of the company over the next four years.
Metcash will provide Total Tools with a $35 million debt facility to support its growth plans and the future acquisition of an ownership interest in a select number of stores.
Metcash said its long-term vision is to have a mix of independently owned and joint venture retail stores, which is similar to its approach with the Mitre 10 and HTH chains. The acquisition is subject to approval by the Australian Competition and Consumer Commission.
“We are 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’,” Jeff Adams, Metcash Group CEO, said in a statement.
According to Metcash, the acquisition is being funded out of existing cash reserves, thanks to an equity raising in April, which strengthened its balance sheet and provided flexibility to execute on strategic acquisitions, such as Total Tools.
In June, Metcash reported a statutory loss after tax of $56.8 million for FY20, which includes the impact of the AASB leasing standard and a $242.4 million impairment to its goodwill and other assets declared in the first half.
Not including the impact of the new leasing standard, loss of the Drakes business and lower contribution from lease resolutions, however, underlying EBIT was up roughly $12 million on FY19 to $324.2 million. Group revenue rose 2.9 per cent year-on-year to $13 billion.