Earlier this year, Woolworths announced its intent to acquire 65% of PFD at an estimated total cost of $552M. With more than $2M in annual turnover and employing an estimated 2800 employees, the company is the second largest operator in Australia’s food services and distribution market.
The deal attracted the attention of the ACCC and a decision on the proposed acquisition was due to be handed down on 17 December 2020.
Rather than issue a final decision as originally anticipated, the ACCC has handed down a preliminary Statement of Issues in respect of the proposed acquisition. The full ACCC Statement can be found here (Insert link).
“The ACCC is concerned that the proposed acquisition seems likely to increase Woolworths’ already substantial bargaining power in its dealings with food manufacturers,” ACCC Chair Rod Sims said.
“The ACCC is concerned that the proposed acquisition would remove PFD as an important alternative customer in the food sector, reducing the number of buyers and increasing Woolworths’ relative size as a customer of food manufacturers and suppliers,” Mr Sims said.
“The dominance of Coles and Woolworths in food retail means that wholesale food distribution is an important alternative customer channel for manufacturers.”
“If Woolworths was able to use its existing bargaining power as a retail buyer to gain better supply prices for PFD than PFD could obtain on its own, in the medium term this could have serious consequences for the structure of the wholesale food distribution sector, such as reduced range, choice, and service levels,” Mr Sims said.
The ACCC is also continuing to consider other issues, including whether Woolworths acquiring a company which supplies its competitors will lead to risks of foreclosure, and the extent to which some of Woolworths’s associated businesses currently compete with PFD – or are likely to compete with PFD in future.
“This proposed acquisition is of interest to the petrol-convenience industry given that it is the first time a major Fast Moving Consumer Goods (FMCG) retailer has moved into the B2B space with possible flow-on consequences for the supply of food products to small-format FMCG outlets like servos”, said ACAPMA CEO Mark McKenzie.
“The ACCC decision to issue a preliminary statement of issues and provide stakeholders with extended time for comment, is welcome given the novel nature of the acquisition and the potential for adverse impacts on our industry”, said Mark
ACAPMA is reviewing the ACCC statement with a view to considering whether to make a submission to the ACCC by the 1 February 2021 deadline. Any ACAPMA member or affiliate who has concerns about the proposed merger is encouraged to contact ACAPMA CEO (by emailing email@example.com) as soon as possible.