Wesfarmers approved for Catch Group acquisition

05/08/2019

Wesfarmers has received a green light from the competition regulator to acquire one of Australia’s oldest and largest online retailers, Catch Group, for $230 million, according to a recent Australian Financial Review report.

Wesfarmers Chief Executive, Rob Scott, considered launching a multi-brand online retail platform similar to Catch Group to leverage the group’s retail businesses, which includes Kmart, Target, Officeworks and Bunnings, and better compete with Amazon and eBay. Wesfarmers then decided it would be faster and more cost effective to buy an established online retailer, approaching Catch Group’s founders, Gabby and Hezi Leibovich, several months ago, according to the report.

The $230 million deal, which was announced in June, will enable Wesfarmers to build Kmart and Target’s online sales, which are currently less than three per cent of total sales, while tapping Catch Group’s expertise in e-commerce, online fulfilment and digital marketing.

Wesfarmers Chief Executive Officer, Rob Scott received the green light to proceed with the acquisition of Catch Group, according to the Australian Financial Review.

The Australian Competition and Consumer Commission launched an informal review into the proposed acquisition in June and was to have handed down its decision on August 15, but brought forward the announcement, saying it would not oppose the acquisition on August 5.

The ACCC said the acquisition was not likely to substantially lessen competition in any relevant markets because Wesfarmers and Catch were not close competitors.

As part of the review, the ACCC examined physical and online retail competition, as well as any potential impact on third-party marketplace sellers.

“We reviewed whether Wesfarmers’ retail position could be leveraged into online sales and marketplaces in an anti-competitive way,” ACCC Commissioner Stephen Ridgeway said August 5.

“The current growth in online marketplaces (such as Amazon, eBay and Kogan’s marketplace) is fostering competition between providers, and feedback indicated that Wesfarmers’ proposed acquisition of Catch would be unlikely to change that level of competition,” he said in the Australian Financial Review report.

The proposed acquisition would not reduce online marketplace options for third party sellers as Wesfarmers would be a new entrant and Wesfarmers-Catch would compete with other online marketplaces.

The combined group was likely to be effectively constrained in its dealings with third party sellers.

“Stakeholders also consistently told us that Catch and Wesfarmers are not close competitors, primarily due to the differences in their business models,” Mr Ridgeway said.

Catch offers out-of-season, clearance or overrun branded products and operates an online marketplace, while Kmart and Target are predominantly bricks and mortar stores.

Catch sells products such as food and liquor, clothing, footwear, furniture, sporting goods, electronics and games. It owns Catch.com.au, Mumgo, Grocery Run, Brands Exclusive and The Home and runs two fulfilment centres in Victoria, according to the Australian Financial Review.