Woolworths, Metcash to acquire Foodland

May 25, 2005 - 10:15AM

Grocery wholesaler Metcash Trading and supermarket giant Woolworths have won the support of takeover target Foodland Associated Ltd for their offer to acquire the Perth-based company.

The total offer from Metcash and Woolworths is between $3.28 billion to $3.384 billion.

Woolworths will acquire 19 Action stores and three Action sites in Australia, along with Foodland's New Zealand stores.

The Woolworths acquisition is worth $2.5 billion in enterprise value.

Metcash will acquired the remaining business for $780 million in cash.

"The board of Foodland Associated today announced that it has unanimously agreed to recommend the acquisition of its businesses by Woolworths Ltd and Metcash Trading Ltd," Foodland said.

"The transaction will be structured via an FAL managed demerger with a simultaneous sale of the resulting separated parts of the FAL Group to Woolworths and Metcash through two schemes of arrangement."

The total offer is valued at between $3.280 billion and $3.384 billion, depending on whether Foodland shareholders elect to receive cash or scrip from Woolworths and Metcash.

This represents a price range of $25.29 per Foodland share for the cash offer to $26.17 per share for the scrip offer after subtracting net debt of $300 million.

"This is well within the fair value range of FAL of $24.86 to $27.33 per share as determined by the independent expert," Foodland said.

Woolworths has agreed to acquire Foodland's New Zealand business along with 22 Action stores, including three development sites, in Western Australia, Queensland and New South Wales for an enterprise value of $2.5 billion, comprised of $1.25 billion in cash and assumed net debt and approximately 81.6 million Woolworths shares.

Metcash has agreed to acquire the rest of Foodland's Australian business of Foodland except for those 22 Action stores for cash consideration of $780 million or $859 million under the scrip alternative.

Both acquisitions will become effective immediately when the demerger is completed, which is expected to be in August.