Metcash, which operates Independent Grocers of Australia (IGA) supermarkets, has purchased the Franklins supermarket chain for A$215m (US$182m), The Australian has reported.
The 85 supermarkets in New South Wales, Metcash's weakest Australian state, were owned by South African retailer Pick 'n' Pay, and will lift Metcash's share of the Australian grocery market to above 20 per cent.
Pick 'n' Pay chairman Gareth Ackerman said his firm had decided to look for a partner to buy into the underperforming Franklins, when Metcash made a generous unsolicited offer.
"We weren't getting an adequate return to continue the business . . . fortunately, Franklins has a greater strategic value to Metcash than under continued Pick 'n' Pay ownership," Mr Ackerman said.
As part of the agreement, both companies have agreed to halt a five-year court battle over wholesale agreements.
The move is expected to add around A$500m (US$423m) in annual sales to Metcash's IGA Distribution division, which recorded A$7.1bn (US$6bn) in revenues throughout 2009/10.
Investors on both sides of the Indian Ocean welcomed the deal, with both Pick ‘n' Pay and Metcash shares closing three per cent higher on the back of the news.
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