The fate of struggling supermarket chain Franklins is expected to be revealed on Monday (26 February), the day when parent group Dairy Farm International Holdings is due to report full year earnings.

Australia's third largest supermarket is expected to post losses totalling A$100m for 2000, on top of the A$60m accrued in 1999. This brings total debt to A$500m and has left analysts spending much time speculating on the value of the 287 outlet strong chain.

Dairy Farm has reinvested heavily in the group but some believe that this will be the best chance it has to break even, because Franklins could fetch up to A$500m for its Hong Kong-based parent. Others point out however that if the chain is carved up for separate buyers, the price is likely to be lower.

This latter option is becoming increasingly likely. The supermarket sector giants Woolworths and Coles Myer have come up against significant regulatory hurdles for a buyout, in the form of the Australian Competition and Consumer Commission (ACCC), leading many market watchers to conclude that a sale to one domestic buyer is highly unlikely.

Woolworths is not ruling out a buyout attempt, however. It is possible that its wholesale division Australian Independent Wholesalers (AIW) could bid for a large majority of the outlets and then sell them on, possibly letting them form part of the group's floatation.

If one of the giants were able to takeover the majority of Franklin's stores, Australia's retail scene would be significantly changed. A shake-up is becoming increasingly likely as analysts expect the ACCC to favour the offers of foreign companies, as the competition watchdog is eager to widen the fundamentally concentrated retail market, 70% controlled by Woolworths and Coles Myer.

German discount giant Aldi arrived on the scene last month and already consumers have witnessed a major fluctuation in grocery prices as the competition heated up. Aldi has uncharacteristically spoken out about the Franklins chain, commenting that it is not interested in buying up outlets because its "strategy is to grow organically, not by acquisition." But if the chain were actually in the offering, analysts believe it could easily be a different story. The acquisition of so many new outlets may prove irresistible to Aldi in its bid to gain market share.

In this way, the pull will also be strong for Perth based Foodland Associated, eager to expand on the east coast, and even Metcash Trading. Similarly, analysts are predicting interest from other foreign companies, including the UK's Tesco, Dutch group Ahold and US giant Wal-Mart.

As time goes on the option for Dairy Farm are narrowing. At the very least, it will find itself having to close the least profitable Franklins outlets. In its current position however, it does make sense to quit the venture while minimising its losses. A re-capitalisation or a float are possible options, but analysts are certainly expecting a break-up.