Australia’s third largest retailer Metcash has said that its AUD$1.1bn acquisition of the supermarket and wholesaling business from Foodland Associated is proceeding according to plan but that it would not be considering a share buyback until the next financial year.
Metcash chief executive Andrew Reitzer said while Metcash considered a share buyback possible, no action could be taken until after the fiscal year-end on 30 April because of regulatory stipulations. “The board will have a look at capital management initiatives after our year end,” he said.
Metcash added that the acquisition could add up to $90m to group EBIT (earnings before interest and tax) on a normalised annual basis. Reitzer said the Foodland acquisition had boosted the company’s buying power by 40%, and was expected to lift wholesale revenues by a forecasted $1.86bn.
Metcash, the group behind IGA supermarkets and Campbells Cash and Carry, acquired Foodland’s Australian assets in November, as part of a $3.3bn joint acquisition with Woolworths.
Metcash bought Foodland’s 60 Action supermarkets with the intention of selling them on to IGA retailers. Reitzer reported that plans to sell 50 of these stores was running ahead of schedule and was expected to be completed by October, boosting the company’s cash flow by about $150m.
The company plans to retain 12 larger stores for at least a further 12 months, and would be looking for a single IGA buyer for these outlets.
