Pick n Pay may sell its Franklin stores in Australia individually or in groups via a tender process, the JSE retailer said.
This, however, would be carried out only if the sale of the stores to Metcash Trading was not approved by the Australian Competition and Consumer Commission (ACCC).
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 September 22 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 Pick n Pay has received no other offers for the business since the strategic review was announced in April this year, Pick n Pay considered it appropriate to initiate the alternative exit strategy.”
The ACCC was expected to make its final decision on or before November 11 2010.
“Following the strategic review announced earlier this year, Pick n Pay took a decision to exit the Australian market,” chairman Gareth Ackerman said.
The company’s preferred option to achieve this was 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.”
Ackerman said 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.”
Ackerman said he had 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,” he said.
Pick n Pay expects to receive initial offers for the stores and brands by October 26 2010.
In conjunction with its advisers, Pick n Pay would then assess offers received for stores and brands so that it could move to complete the alternative exit strategy in a timely fashion, should the proposed sale of the Franklins business to Metcash not proceed.