BREAKFAST DEALS: Sims' supermarket chains

Since Rod Sims took over at the ACCC, the big question has been what he'll do with the supermarkets. Now the competition tsar has put his foot down just south of Penrith, New South Wales, potentially setting some new deals standards for the supermarket industry. Meanwhile, the ACCC has also said no to global food giant Heinz over an organic baby food company and Qantas has landed a big-time Asian investor for Jetstar Hong Kong. With Europe sorted, Alan Joyce's focus is back on Asia.

Woolworths

Supermarket giant Woolworths is thinking about challenging a decision from the consumer watchdog to block its push for a new Woolies store at a housing estate called Glenmore Ridge in Greater Western Sydney.

Before the people of Glenmore Park, the suburb in which the site resides, get a big head from the national headlines about their very specific shopping needs, there’s a bit of context to this story.

Australian Competition and Consumer Commission chairman Rod Sims is breaking new ground by opposing the acquisition of a site by a supermarket – it’s owned by the developer, Stockland – without a supermarket on it.

“Woolworths already operates the only supermarket in the suburb of Glenmore Park, and it has the next closest supermarket located in the nearby suburb of South Penrith,” said ACCC chairman Rod Sims, who has previously expressed concern about the growing market share of the two major grocery chains.

“The Glenmore Ridge site represents the only opportunity for a competing supermarket to enter Glenmore Park in the foreseeable future, other than an ALDI that is due to open in 2014,” he said. “In effect, the choice is between Glenmore Park residents having two Woolworths and one ALDI supermarket, or having three different supermarkets in their area.”

You see? There’s the important bit of information. Is the ACCC looking to set a precedent where the big supermarkets will not be able to own more than one supermarket in three within a certain definable market?

It’s a particularly bold decree from the ACCC that the people of Glenmore Park should have access to three different supermarkets when we live in a country with an industry duopoly. That’s ambition.

The back and forth between Woolworths and the consumer watchdog over the last few months has included a debate, amongst other things, of what constitutes a market.

This has enormous implications for deals in the supermarket industry – not just for Woolworths, but for its emerging competitors as well.

The significance of this decision might turn out to be overstated in hindsight. But ever since Sims came into the job, it’s been very clear that he’s interested in the big supermarkets.

The question has been when, and in what context, the successor to Graeme Samuel would put his foot down and say, “No, you can’t have this for these reasons”.

Those reasons could be applied across the entire country. Hence, Woolies is thinking about challenging them.

And while we’re talking competition regulation, the ACCC has blocked an attempted takeover of organic baby food company Rafferty’s Garden by American giant HJ Heinz.

Heinz is of course the subject of a $US28 billion ($29.3 billion) takeover from the world’s most famous investor, Warren Buffet, and private equity firm 3G Capital.

But the ACCC couldn’t stomach Heinz, soon to be Buffett, getting Rafferty’s Garden.

"The proposed acquisition would combine the two largest suppliers of wet and dry infant food in Australia, resulting in highly concentrated markets where barriers to entry and expansion are high," Sims said.

Qantas Airways, Shun Tak Holdings, Jetstar Hong Kong, Virgin Australia, Air New Zealand

Qantas Airways has secured the backing of a major Asian tycoon for its pitch at China’s low-cost travel market.

Jetstar Hong Kong will receive a $66 million injection from Hong Kong Stock Exchange-listed shipping and property company Shun Tak Holdings, chaired by billionaire owner Stanley Ho, who is known for his gaming interests.

The Jetstar arm will remain capitalised at $US198 million ($206.5 million), with Qantas, China Eastern Airlines and Shun Tak all holding a one-third stake each.

One of the chief criticisms of Qantas Airways boss Alan Joyce, before the five-year alliance with Emirates was bedded down, was that the airline hadn’t made much progress on its pivot towards Asia.

It hasn’t taken long for Joyce to remind onlookers that his focus has always been Asia, but first he had to fix the company’s European losses.

And while we’re talking airlines, Air New Zealand has confirmed that it was the one behind a parcel of shares worth 3 per cent of the Virgin Australia register. This takes its stake to 22.99 per cent, assuming regulatory approval.

Some expect Air NZ will eventually butt heads with fellow major shareholder Singapore Airlines. However, Business Spectator’s Stephen Bartholomeusz offers a pretty solid history between the two companies to suggest that such animosity probable won’t eventuate.

Wrapping up

This week started with Nationals leader Warren Truss heaping pressure on the Foreign Investment Review Board to reject the GrainCorp takeover offer from US giant Archer Daniels Midland.

The presumed incoming deputy prime minister invoked Australia’s ambitions to be Asia’s food bowl.

“It does surprise me that there’s never been a case that the board felt was not in the national interest,” said Truss.

“You know, for instance, they actually agreed to a takeover of 100 per cent of the Australian rice industry. Now, if it was thought that having no Australian ownership on the Australian rice industry was a good thing, when will they ever say no?"

Well, GrainCorp’s Alison Watkins has pointed out that if we want to be Asia’s food bowl, we need foreign cash.

“There’s nothing new about foreign investment in agriculture, we’ve always had to rely on inflows from foreign countries to support our industry, but if you listen to the public debate you’d think it was a new threat,” said Watkins at a conference in Sydney yesterday.

Elsewhere, Archer Capital is understood to have knocked back an informal $500 million offer from a Thai company for its Healthe Care private hospital business, according to The Australian Financial Review.

And finally, US-listed Verifone Systems has forked over $NZ70 million ($58.4 million) to ANZ Bank for its New Zealand eftpos terminal leasing unit.