Could a merger mean competition for Bunnings Warehouse?

Several reports across media outlets this week are predicting that Mitre 10 (owned by Metcash) and Home Timber & Hardware (HTH) (owned by Danks Holdings Limited) will merge.

If the merger does go ahead between the two independent hardware franchises it will create a large network of approximately 800 to 900 stores Australia-wide owned by a single entity.

It is tipped that the merger would create significant competition for hardware giant Bunnings.

Retail industry analyst Rob Lake said he would be surprised if Bunnings was concerned about the potential merger.

“I don’t think Bunnings will feel threatened. If we look at the example of Masters, who can match Bunnings on price and range, they fail dismally because they don’t provide the high-level of customer service and the retail experience that Australian consumers like,” he said.

Mr Lake said that for a Mitre 10 and HTH merger to be beneficial to the independent merchant sector in Australia, the focus would need to continue to be on the customer experience.

“The competitive advantage that Mitre 10 and HTH currently have is within their trade offering, which is huge, because they are both nimble and responsive.

“Experience and service are currently the two things that independent merchants can ‘out-gun’ Bunnings on,” he said.

It has been reported that HTH’s owners Danks earnings, before interest and tax, reached $20.9 million last financial year. This was following a boost after the acquisitions of Hudson Timber and Hardware and Belmont Timber in 2014.

Mitre 10’s Chief Executive officer Mark Laidlaw said in October, during his speech at the 2015 National Hardware Industry Luncheon, that “we’ve got to reinvent ourselves for the next five years so we can be prepared for the oncoming competition,” he said.

If a merger does occur then the next ten years will prove be a significant period of change, and pricing, for business owners, suppliers, and customers across the home hardware sector within Australia.

TimberTrader News magazine approached Metcash and Home Timber & Hardware for comment on the mounting speculation, however, both companies declined a statement.