Metcash stake in Champions IGA, preparing for Action stores?

Metcash has continued its strategy of acquiring ‘strategic stake’ in its customers. Starting from this month, this leading independent grocery and liquor distributor would have 25.1 per cent equity stake in Champions IGA Group in Bendigo, Victoria. The group operates 6 supermarkets under Champions Supa IGA banner in that area.

In May this year, Metcash had announced an ‘in principle agreement’ to acquire 26 per cent equity in Ritchies Stores Pty Ltd, which runs 38 Ritchies IGA stores, 34 in Victoria and four in NSW. That agreement has also become effective in July. gfq had carried an estimate that Metcash would pay about $40 million for that stake. See: How much is Metcash paying for the 26 per cent stake in Ritchies?

Some analysts are estimating that Metcash could pay around $6 million for the stake in Champions IGA, There will not be any changes in the board of Champions IGA except that Metcash representatives will join it.

Why is Metcash taking ‘strategic’ stakes?

Andrew Reitzer, CEO of Metcash, believes that this is a win-win strategy for its customers and for itself. Its customers get funding to grow and expand and Metcash, in turn, ensures that it stays as their supplier in the long term.

Brendon Goddard, the CEO of Champions said the funds from Metcash will help the group achieve its “growth objectives of an additional 8 supermarkets over the next five years”. Mr. Reitzer said that more alignment arrangements are being concluded with other major IGA retailers.

An analyst gfq spoke to, offered a more specific interpretation of this strategy. He said it was Metcash’s way of getting its customers prepared when it offloads the Action stores that would come as a result of Foodland acquisition.

Source