Bid for Franklins too high, say rivals

A consortium of four family companies, each of which owns at least four independent supermarkets, lodged a non-binding indicative offer for Franklins of $110 million on November 4.

Metcash, Australia's largest wholesale supplier of packaged groceries to independent supermarkets, agreed to pay $215 million in July.

A consortium member, Vasilli Karellas, gave evidence last week that the group would never match the Metcash offer. "It is only worth $215 million to Metcash; to no one else," Mr Karellas said.

His consortium partner, Theo Koundouris, told the court yesterday that four years ago his company alone had offered Pick n Pay $120 million for Franklins. Franklins had responded with a counter-offer of a joint venture with the Koundouris family's supermarkets in Sydney and Canberra, which was rejected.

"I considered this valued the Franklins assets at $200 million and I didn't consider this was a fair valuation of the business," Mr Koundouris said.

Other consortium members who have been called as witnesses by the Australian Competition and Consumer Commission are John Krnc, whose family company is based in Canberra, and Peter Lionis, from Brighton-Le-Sands.

An ACCC executive, Tim Grimwade, gave evidence on Monday that price was "completely irrelevant" to an assessment of whether a merger or acquisition complied with competition law.

The ACCC has put forward the consortium, which it calls Bidco or KKK after the surnames of three of its members, as an alternative purchaser of Franklins if Justice Arthur Emmett bars Metcash. The regulator argues this would give independent retailers a choice of wholesale supply.

In his opening submission last week, Pick n Pay's barrister, John Griffiths, SC, said the Bidco consortium had "expressed at best highly conditional and tentative interest or hope in acquiring some Franklins assets at what can only be described as fire-sale prices".

"The ACCC has not explained how the significant challenges in operating a second wholesale operation will be overcome, how it will operate, how it will be funded or who will own the stores," Mr Griffiths said.

Mr Krnc said on Friday the National Australia Bank had given him "indicative" support in principle for his $10 million share of the bid.

Yesterday Mr Koundouris said his family company, which develops property as well as operating supermarkets, had in recent years completed a $65 million development in Five Dock and, with a partner, a $70 million project in Canberra. Both were funded by the NAB, he said, and all four consortium members were longstanding NAB customers.

The evidence about the consortium has been overshadowed in recent days by Metcash's allegations that the ACCC opened its case to block the July deal on a false basis and had breached its duty to the court by withholding relevant material.

The regulator has denied these accusations, which Metcash has signalled it will revive as soon as the ACCC has led all its evidence.

The allegations relate to the ACCC's knowledge of the involvement of Woolworths in a potential bid for Franklins in conjunction with a small Queensland grocery wholesaler, SPAR Australia, whose chief executive, Lou Jardin, ran Metcash's wholesale grocery division until last year. The finance director of Woolworths, Tom Pockett, is due to give evidence next week.