Advised by Freehills, Metcash acquired a controlling 50.1 per cent in the Mitre 10 Group in return for an estimated $55 million of new equity capital poured into the Mitre 10 Group.

The deal ends the search by Mitre 10 Group - advised by Middletons and DSM - for external equity from a strong strategic alliance partner, which is something it needed to better position itself against increased competition from the likes of Bunnings and the Woolworths/Lowe's joint venture.

Metcash recognised similarities between the Australian hardware sector as it is today, and the grocery market of the late 1990s, when independent grocery retailers lost market share and struggled to compete with Woolworths and Coles.

"This transaction adds a significant fourth pillar to Metcash's already impressive business," said Freehills partner Martin Shakinovsky.

"Metcash has been reviewing a number of strategic growth opportunities over the past few years which would enable it to leverage off its skills and experience in brand management, logistics and merchandising in complementary industries - the hardware industry and the acquisition of control of Mitre 10 would seem a logical fit."

VIEW ALL

The transaction was completed via an inter-conditional scheme of arrangement involving the independent unlisted public companies Mitre 10 Australia Limited and Mitre 10 Limited.

It also incorporates a new structure which gives Metcash the right to move to 100 per cent ownership in 2012 or 2013 for a price based on an earnings multiple, minus net debt, at the appropriate time.