THE Perth head office of grocery group Foodland Associated will effectively be closed down if Metcash succeeds in its takeover offer, adding to the long-term trend of Perth losing corporate offices.
Prominent Western Australian companies to have closed their Perth head office following a takeover include Aherns, Bristile, Challenge Bank, SGIO, and Town & Country.
Some other Perth companies, such as Multiplex and United Group, have transferred head office interstate.
This trend has been partly offset by the ability of Perth to attract the Australian head office of resource companies, such as Alcoa, AnglogoldAshanti, ChevronTexaco, Ticor and Woodside.
The loss of head offices from Perth not only has a direct impact on the local job market, by removing senior employment opportunities, but also has a flow-on to local service providers in fields such as accounting, legal and banking.
Metcash’s plans for Foodland were outlined its bidder’s statement, released late last week, which unexpectedly also raised a number of questions about the takeover.
Metcash’s goal is to win control of Foodland’s Australian wholesale operations, which it values at about $845 million.
One of the complex aspects of the takeover is Metcash’s plan to transfer ownership of Foodland’s New Zealand grocery business back to Foodland’s existing shareholders.
However the bidder’s statement reveals this is subject to approval by 75 per cent of Metcash’s shareholders.
Foodland shareholders would not be able to influence the vote, since they would initially be issued with non-voting preference shares.
Metcash said it is “confident that the NZ restructure can be implemented and the NZ Holdco transfer effected”, but offers no guarantees.
It also said Foodland shareholders would benefit from capital gains tax rollover relief, though it is understood Foodland’s advisers are seeking tax advice to clarify this aspect.
Metcash says the combination of its existing business with Foodland’s wholesale business is expected to lead to improved buying power, supply chain and logistical benefits and cost savings.
Foodland’s head office in Perth is clearly seen as one of the main areas for cost savings, with Metcash nominating finance and accounting, company secretarial, risk management, in-house legal and planning functions as areas where duplication could be removed.
Apart from head office changes, Metcash aims to achieve savings by closing down Foodland’s Melbourne buying office and centralising buying out of its existing Sydney office.
Metcash also proposes implementing its existing IT systems with Foodland’s operations.
It said this move would eliminate a large portion of the $68 million Foodland planned to spend on a new merchandising system.
The bidder’s statement reaffirms Metcash’s plan to sell the 37 Action stores in WA and the 45 Action stores in Queensland and NSW to independent retailers or management and employees of those stores.
It believes there is strong interest in these stores but adds that, where required, it will enter into a head lease with the owners of Action sites.
The upside for Metcash is that the independently owned stores, which will be co-branded IGA, will continue to purchase supplies from Metcash.