In the open at last

Woolworths has announced its bid to takeover Danks, Australia’s second largest hardware retailer. The deal is a joint venture between US number two hardware giant, Lowes, and Woolworths. Lowes will get a one third stake in the deal, which has been unanimously recommended by the Danks board. The share offer of $13.50, on top of the $0.53 approved final dividend, values the company at $87.6 million dollars. This is 65% up on Danks’ last closing price of $8.20. Rumours of Woolworths’ intent to enter the $24 billion hardware market ignited earlier this year when Woolies hired property specialist Richard Champion from Harvey Norman. It was reported that his role would be to locate 120 sites worth a collected $1.8 billion. Interestingly, Woolies hotel partner, Bruce Mathieson, is the landlord of the Mitre 10 mega store at Keysborough in Melbourne, thought to be Woolworths’ first store site. Woolworths now says it intends to locate a total of 150 new sites within the next five years (Bunnings currently has 175) the first of which will open in fiscal 2011. It has already secured 12 sites, with reports it is in final negotiations for another 15 greenfield sites, all of which would house stores of over 10,000 square metres. The Woolworths offer is subject to regulatory approval, will remain valid for six weeks and requires a minimum of 90% acceptance from shareholders. If it gets the go ahead, the acquisition will have a positive earnings before interest and tax (EBIT) and earnings per share contribution from day one, said Woolworths chief executive Michael Luscombe. “At the moment the sector is dominated by one major big box player, so there is a real opportunity for increased competition in that part of the sector,” said Michael. Danks currently services 939 independent hardware stores as well as 205 Home Timber & Hardware stores, 312 Thrifty-Link Hardware stores and 66 Plants Plus Garden Centre stores.