Woolworths’ pet retailer acquisition in Australia faces challenges

The Australian Competition and Consumer Commission (ACCC) launched an investigation in January after Woolworths, Australia’s largest retail group, acquired 55% of Petspiration, the owner of the retail chain PETstock.

The antitrust body is concerned that the purchase could negatively impact competitor markets. As part of the investigation, the ACCC has opened communication with other market participants and asked them to comment on “the competitive effects of the transaction.”

According to the ACCC, the authority has been waiting for information from the Petspiration Group since March and has postponed the expected announcement scheduled for 20 April 2023.

Selling stores

Completing this transaction is important to Woolworths. The firm’s CEO Brad Banducci defended that Woolworths “had limited presence” in the billion-dollar pet market.

One of the options on the table is that the ACCC forces the company to sell stores in order to approve the deal. “PETstock bought Best Friends and other retailers but never got the ACCC approval for those deals as it was not warranted at that time. But now that Woolworths is involved, the ACCC is looking at these historical transactions,” a source told The Financial Review news outlet.

GlobalPETS reached out to ACCC, who refused to comment on the situation as the investigation “is still ongoing,” while Woolworths chose not to respond.

A similar case happened in 2022 in Italy, when the Italian antitrust body obliged Arcaplanet and Maxi Zoo to sell between 50 and 70 of its stores after they merged.

Was it a good or a bad move?

In December 2022, Woolworths announced the takeover of Petspiration for A$586 million ($379.7M/€‎348.1M).

A Goldman Sachs analyst evaluated the deal as an “incrementally positive step.”

“The transition from liquor retail and gaming/hotels into higher growth, and closer synergies with the family shopper pet retail is in line with its strategy of building a reinforcing retail ecosystem,” the investment banking group added.

In contrast, financial services firm JPMorgan remained skeptical of the acquisition, saying it was “questionable capital allocation.”

Earlier in the year, the retail group invested A$4.9 million ($3.3M/€3M) into online pet food and supplies retailer PetCulture.