’Kick in the guts’: Woolies deal slammed

 

The competition watchdog is being urged to block Woolworths' planned purchase of a controlling stake in Australia's biggest family-owned food service distributor, saying the $552 million deal is opportunistic.

The Australian Competition and Consumer Commission last month launched a review into the supermarket giant's proposed acquisition of 65 per cent of PFD Food Services, inviting submissions from interested parties.

On Monday, Australian Small Business and Family Enterprise ombudsman Kate Carnell revealed she had lodged her opposition.

Ms Carnell said Woolworths - which already accounts for about one-third of supermarket sales - should not be allowed to pick up a large chunk of the food services market as it would significantly improve its competitive position against small supermarket competitors.

She said PFD could pass on information about them, and Woolworths' claims it would establish "Chinese walls" to prevent this was questionable.

Ms Carnell said she was also concerned the deal would lead to significant job losses among smaller suppliers and distributors, which would have a battle on their hands to compete with a Woolworths-controlled PFD.

While Woolworths had a spike in sales during COVID-19 restrictions, independent food distributors had struggled and were only now starting to get back on their feet.

"To allow this deal to go ahead would be a real kick in the guts," Ms Carnell said.

"Woolworths has described its push into the food services sector as a 'strategic investment', but the timing is opportunistic at best.

Allowing Woolworths’ plan to take control of a family-owned food distributor would be a ‘kick in the guts’, the ACCC has been told. Picture: NCA NewsWire/Bianca De Marchi
Allowing Woolworths’ plan to take control of a family-owned food distributor would be a ‘kick in the guts’, the ACCC has been told. Picture: NCA NewsWire/Bianca De Marchi

"The ACCC should also consider the impact this deal could have on manufacturers and farmers. The last thing they need right now is a dominant market player putting price pressure on suppliers."

PFD began in 1943 in Melbourne and delivers dry goods, frozen and chilled products, fresh seafood and meat, confectionery, paper products and cleaning products to pubs, cafés, airlines, hotels, restaurants, aged care villages, resorts, convenience stores and fast-food outlets.

Announcing the deal in August, Woolworths said it would involve the 100 per cent acquisition of PFD's freehold properties, mainly comprising 26 distribution centres.

It said PFD would "continue to operate as a stand-alone business" and retain its senior leadership team.

"Like many other businesses, PFD's current earnings have been impacted by COVID-19," Woolworths said.

"Despite this, the investment is expected to be earnings per share accretive in the first full year of ownership and deliver a strong return on investment to Woolworths Group."

Family-owned food distribution company Galipo Foods has also spoken out against the deal, saying it would be a "disaster" for businesses across Australia.

The ACCC is expected to release its findings in December.

Originally published as 'Kick in the guts': Woolies deal slammed


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