Australia's $24 billion hardware market

Woolworths and US retail giant Lowe’s launch takeover for Danks hardware group

Tuesday 25 August 2009 11:54

Woolworths has finally made its much-anticipated entry into Australia's $24 billion hardware market by launching an $87 million takeover bid for Australia's second largest hardware group, Danks Holdings.

The board of Danks, which supplies 205 Home Timber & Hardware stores, 312 Thrifty-Link Hardware stores, 66 Plants Plus Garden Centre stores and 939 independent hardware stores, has unanimously recommended the deal to investors, effectively bringing the curtain down on the company's 150-year history.

Woolworths has also announced it will enter a joint venture with US-based retail giant Lowe's. The two companies aim to develop a network of stores around the country, with the first warehouse store to be open in late 2011.

Woolworths eventually wants to have 150 stores. It says it has already secured 12 sites and is in talks to grab another 15. Most of the new stores will be over 10,000 square metres in size.

Australia's largest retailer has long coveted a piece of the booming hardware market, which is dominated by the Bunnings chain, owned by Wesfarmers (which also owns the Coles supermarket chain).

Bunnings has 175 warehouse-style stores around Australia and had earnings of over $650 million last financial year.

"Woolworths has studied the category for a considerable period of time and believes its best-in-class supply platforms along with its global sourcing and distribution capabilities will ensure it is well placed, together with Danks and Lowe's, to grow Australia's hardware sectors," Woolies chief Mike Luscombe said in a statement.

The decision to enter the hardware section in conjunction with Lowe's is something of a surprise. The US company will own a third of the joint venture and will provide Woolworths with valuable management experience in the area; it is the second-largest hardware chain in the US, with annual sales of $US48.2 billion.