Petstock to divest WA assets over regulator concerns

Australia’s second largest specialty pet retailer Petstock is proposing to divest 11 of its Western Australian assets to squash market competition concerns raised by the regulator. 

Petstock is proposing to divert one My Pet Warehouse store and 10 Pet City stores in WA after the Australian Competition and Consumer Commission flagged market dominance concerns following a string of acquisitions.

The WA assets are part of the proposed divestiture of 41 specialty pet retail stores, 25 co-located veterinary hospitals, four brands and two online retail stores.

The proposed sell-off follows an investigation launched by the ACCC earlier this year prompted by Woolworth’s proposed acquisition of a 55 per cent stake in Petstock.

The ongoing investigation found Petstock had completed four takeovers that were not notified to the ACCC, namely the acquisitions of Best Friends Pets, Pet City, Animal Tuckerbox and Pet and Aquarium Warehouse in Victoria.

ACCC said it could seek court-ordered divestiture of shares or assets acquired in breach of the merger law for a period of three years after completion of a transaction.

The regulator also said it could seek penalties orders for a period of six years under the Competition and Consumer Act.

“During the current Woolworths, Petstock merger review, market participants expressed concerns about the already significant consolidation that had occurred within specialty pet retail in recent years,” ACCC Commissioner Stephen Ridgeway said.

Petstock and Woolworths have offered to provide court-enforceable undertakings to resolve the ACCC’s concerns and enable Woolworths to pursue the 55 per cent equity interest in Petstock.

“Our investigation so far has identified significant concerns with these four transactions in particular because of their impact on national and state-wide chain-on-chain competition, as well as competition in multiple local areas,” Mr Ridgeway said.

“While there is currently no mandatory requirement for merger parties to notify the ACCC, the decision taken here to proceed with acquisitions of this scale without seeking ACCC clearance demonstrates the limitations of the current informal merger regime in Australia.”

In a statement on the ASX, Woolworths said it acknowledged the ACCC’s current consultation on a proposed divestiture package of stores acquired by Petstock during 2021 and 2022.

“These transactions all pre-date Woolworths Group entering into an agreement to acquire a 55 per cent equity interest in Petstock Group,” it said in a statement.

“Woolworths Group remains focused on working with the Petstock Group founders to complete the proposed acquisition and will engage with the ACCC as part of this consultation to ensure all regulatory approvals are in place prior to completion.”