Metcash bids for Total Tools 

04/12/2019

The tool wars have erupted in a specialist corner of hardware, with Mitre 10 owner, Metcash currently in talks to acquire fast-growing specialist national tool retailer, Total Tools, according to a recent Australian Financial Review (AFR) report.

It is understood ASX-listed Metcash is preparing an offer to acquire Total Tools, which targets tradie customers specifically and is currently owned by a co-op of franchisors.

Metcash is bidding as part of an auction run by Miles Advisory, on behalf of the Total Tools franchisors, who each own five per cent or less of the retailer, according to the AFR report.

Metcash is understood to be up against a private equity firm, with both parties expected to submit bids in the coming weeks, with Metcash taking counsel from Luminis Partners. 

It is believed sell-side adviser Miles Advisory was hired to test private equity and trade buyer interest in Total Tools earlier this year – culminating in the decision to be made this month.

Total Tools is believed to have considered an ASX listing in 2018 with the help of investment bank Citigroup, but did not proceed, according to the report.

Total Tools was pitched to potential buyers as the country’s largest independent professional tools retailer, with earnings running at about $25 million a year. Interested parties were told the 30 year old retailer, which includes its Total Tools Online Store, has more than 7000 products on hand and access to 60,000-plus products across Australia.

The business is expected to fetch close to 10 times earnings.

One pressing question which does remain is whether Metcash would be able to acquire the entire business, or if it would be required to hive off one or two small parts.

Metcash’s move mirrors a recent play by Bunnings, when the Big Box revealed plans to acquire Adelaide Tools retailing chain in early October. Adelaide Tools runs five retail outlets in the South Australian capital and also operates the Oaklands Mower Centre.

The acquisition requires competition approval, according to the AFR report.