ACCC clears Woolworths' majority stake acquisition in Petstock
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The news: The ACCC has accepted a court-enforceable undertaking from pet supplies retailer Petstock to divest a package of sites and assets, including 41 retail stores, following the ACCC’s enforcement investigation into past acquisitions by Petstock.
The numbers: Australia's competition watchdog said it will not oppose Woolworths' proposed acquisition of a 55% controlling interest in Petstock, and has also accepted a court-enforceable undertaking from Woolworths to support the Petstock divestiture. Petstock's divestment undertaking has led to an adjustment to the previously disclosed $586 million acquisition price to $438 million, Woolworths said, at an adjusted enterprise value of $1.46 billion.
The context: Petstock is Australia’s second largest specialty pet retailer. In March, the ACCC began investigating numerous previous acquisitions made by Petstock, that were not notified to the regulator, concerned that its purchase of several of its closest competitors may have contravened the Competition and Consumer Act.
After the ACCC raised these competition concerns with Petstock and Woolworths, both companies offered to provide court-enforceable undertakings to resolve the concerns. The ACCC concluded it was unlikely that Woolworths could leverage its retail position into the specialty pet industry in an anti-competitive way.
What they said: ACCC chair Gina Cass-Gottlieb said: "Petstock's decision to make numerous acquisitions of this scale without notifying the ACCC demonstrates the limitations of Australia's current merger regime. It relies on the goodwill of businesses to voluntarily notify the ACCC and await an outcome. Absent this goodwill, businesses may be able to amass scale through serial and non-notified acquisitions which may fly under the ACCC's radar.”
She added: “The ACCC is particularly concerned that there may be anti-competitive acquisitions taking place without our knowledge under our current voluntary regime.”
Woolworths CEO Brad Banducci said: "We are excited that we are now in a position to move forward with our investment in Petstock Group."
"As we said at the time of the original announcement, this investment will enable Woolworths Group to meet more of our customers' pet needs and is expected to deliver strong returns for shareholders."
The sources: ACCC Media Release, Woolworths ASX release
