Pick n Pay announces alternative Australian exit strategy

The retailer said that the alternative exit strategy is the sale of the Franklins stores and other strategic assets individually or in groups via a tender process.

However, the company said it would continue to work closely with the ACCC to secure approval of the proposed sale to Metcash as its preferred option, and was confident in its arguments to persuade the ACCC to approve it.

On 22 September 2010 the ACCC released its Statement of Issues as part of its review of the proposed sale of Franklins to Metcash.

Given the concerns raised in the ACCC's Statement of Issues and the fact that Pick n Pay has received no other offers for the business since the strategic review was announced in April this year, the group said it considered it appropriate to initiate the alternative exit strategy.

The ACCC is expected to make its final decision on or before 11 November 2010.

Strategic review

"Following the strategic review announced earlier this year, Pick n Pay took a decision to exit the Australian market. Our preferred option to achieve this is through the sale of Franklins to Metcash. While our first priority is to complete the sale to Metcash, we considered it prudent to put in place an alternative exit strategy in the event the ACCC does not approve the sale to Metcash," said Pick n Pay Chairman Gareth Ackerman.

"The decision to sell Franklins was not taken lightly. Without the benefits of scale in the market and in the face of unprecedented discounting by Woolworths and Coles, we consider it essential to start this process immediately as any further delay in selling the business would not be in the best interests of our shareholders, Franklins employees, suppliers and other interested groups," he added.

"We have been encouraged by Metcash's reports of the strong interest in acquiring Franklins' stores since the proposed sale to Metcash was announced in July. While the Franklins business as a whole has not generated an acceptable return on capital employed, Franklins' stores individually have strategic value to existing grocery operators within Australia, including but not limited to independent retailers supplied by Metcash," concluded Ackerman.

Pick n Pay said it expects to receive initial offers for the stores and brands by 26 October 2010 and in conjunction with its advisors, it will then assess and progress offers received for stores and brands so that it can move to complete the alternative exit strategy in a timely fashion, should the proposed sale of the Franklins business to Metcash not proceed.