Mitre 10 owners to win $80 million payout in Metcash acquisition

Mitre 10 store owners are set to receive as much as $80 million two years after the company was initially acquired by Metcash, with the grocery giant announcing yesterday it will purchase the remaining 49.9% of the company it doesn’t own.

Two years ago Metcash paid $55 million to Mitre 10 for a 50.1% stake, most of which went to revitalising the company in the face of growing competition from Woolworths’ Masters chain and Bunnings’ aggressive expansion plan.

Now, shareholders – a large chunk are individual store owners – will receive a payout for their shares. Metcash said two years ago it reserved the right to buy out these shares, known as Convertible Redeemable Preference Shares, for an agreed earnings ratio.

It has been reported by Fairfax this ratio could end up seeing Metcash hand over $80 million to shareholders, although Metcash chief Andrew Reitzer has said previously the price could be between $50-60 million.

“We are delighted to be able to acquire the balance of Mitre 10, which has proven to be a highly strategic and value adding business pillar,” Reitzer said in a statement yesterday

Metcash was contacted this morning about how much of the $55 million in 2010 went to shareholders, but a reply wasn’t available prior to publication. Half was for equity, the other half an advance on a loan – it is understood a large portion of the funds went to refurbishing stores.

“This acquisition will provide an enhanced ability for Metcash to leverage its proven merchandising and brand management skills and world-class logistics capability,” Reitzer said.

But the announcement wasn’t all good news, with Reitzer saying trading conditions continue to remain challenging – he also reiterated earnings per share growth expectations of low to mid single digit growth.

Metcash shares fell 4% after the announcement.