Woolworths target PETstock to divest stores, vets after ACCC red flag
Key Points
- The ACCC says found that multiple historical transactions by pet retailer PETstock may have breached competition laws.
- PETstock now plans to divest 41 specialty pet retail stores, 25 co-located veterinary hospitals, four brands and two online retail stores to address the ACCC’s concerns.
- Woolworths spent $586 million buying a 55 per cent stake in Petspiration Group, (owner of PETstock) in December.
Woolworths’ partial acquisition of PETstock has hit a competition snag forcing it to divest a package of stores and veterinary hospitals to try to win approval from the regulator, which found historical transactions by the pet retailer may have breached competition laws.
In December, Woolworths signed a deal to buy a 55 per cent stake in Petspiration Group, which trades as PETstock, the second-biggest player in the sector behind TPG Capital’s Greencross.
In January, the Australian Competition and Consumer Commission kicked off an investigation into how the grocery giant’s planned move into the sector could affect competition. By mid-March, the ACCC suspended its timeline and delayed the final call on Woolworths’ $586 million transaction.
Woolworths CEO Brad Banducci is still looking to get ACCC approval for its PETstock deal.
PETstock now plans to divest 41 specialty pet retail stores, 25 co-located veterinary hospitals, four brands and two online retail stores to address the ACCC’s concerns, which The Australian Financial Review first flagged in May as problematic.
The commission is seeking views on a proposed divestiture offered by PETstock in relation to four completed acquisitions, of Best Friends Pets, Pet City, Animal Tuckerbox and Pet & Aquarium Warehouse in Eltham, Victoria.
These acquisitions, which the ACCC considers raise significant competition concerns, only came to light during its current review into the proposed acquisition by Woolworths, the regulator said on Thursday.
PETstock completed numerous acquisitions between 2017 and 2022 that were not notified to the regulator.
ACCC commissioner Stephen Ridgeway said during the Woolworths-PETstock merger review, industry players expressed concerns about the significant consolidation within specialty pet retail recently.
The fact that the transactions have taken place does not preclude the ACCC from investigating and, if necessary, taking legal action, it said.
Under the Competition and Consumer Act, the ACCC can 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, and can also seek penalty orders for a period of six years.
The ACCC has significant concerns that the four acquisitions may have contravened section 50 of the Competition and Consumer Act.
“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,” Mr Ridgeway said.
PETstock and Woolworths have offered to provide court-enforceable undertakings to resolve the regulator’s concerns with these completed acquisitions, and enable the supermarket giant to complete its proposed acquisition.
“While the ACCC has decided to publicly consult on the proposed divestiture, this should not be interpreted to mean that this or any other form of remedy will ultimately be accepted,” Mr Ridgeway said.
The ACCC is seeking submissions on the proposed divestiture by November 1.
A PETstock Group spokesperson said it was working with the ACCC and during this time all planned sites for sale would continue to operate. Woolworths said it remained focused on working with PETstock founders to complete the proposed acquisition and would engage with the ACCC to ensure all regulatory approvals were in place before completion.
In April, the New Zealand Commerce Commission approved Woolworths’ acquisition.
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