ACCC approves Woolworths hardware takeover as Mitre 10 warns of new retail duopoly

The Australian Competition and Consumer Commission has given supermarket giant Woolworths the green light to acquire hardware retailer and wholesaler Danks Group, in a move that will allow Woolworths to push forward with plans to take on the giant Bunnings chain.

But Australia’s second largest hardware company, Mitre 10, has described the decision as disappointing and warned that the deal could create another duopoly in the Australian retail sector.

The approval of Woolworths’ $88 million acquisition of Danks will allow the supermarket giant to push ahead with plans to integrate Danks wholesale operations (which supply around 2,000 independent retailers around Australia) and build 150 of its own big-box hardware warehouses over the next five years.

Woolworths is developing the hardware business in a joint venture with US retail giant Lowes.

But Mitre 10 is unimpressed with the ACCC’s decision to approve the Danks takeover.

“The ACCC should have given more weight to the argument that a reduction in competition at the wholesale hardware level could lead to the sector being dominated by the two major supermarket chains – another duopoly in Australia,” Burrowes said in a statement.

To make matters worse for Mitre 10 chief executive Mack Burrowes, the chain has revealed a loss of $11.7 million for the 2008-09 financial year.

“The past 12 months have been among the most challenging we have ever faced at Mitre 10, not just internally, as we reviewed our business strategy, but also within the industry with increased competition and focus on margins,” Burrowes said in the company’s annual report.

However, the Danks deal might yet throw up some opportunities for Mitre 10 is independent hardware store owners become disappointed with having Woolworths as their key wholesale supplier.

“We believe that the entry of Woolworths into the market could result in the further expansion of Mitre 10, as store owners who want to remain independent will most likely look to us for support,” Burrowes said.

“We we will be encouraging Danks store owners who are unhappy with the decision to join our national network of over 450 stores.”