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By Devika Syamnath
Australian conglomerate Wesfarmers is buying e-commerce retailer Catch Group for about $160 million to boost the small online footprint of its retail units such as Kmart and Target amid a big shift by domestic shoppers to the web.
Wesfarmers' third M&A push this year, announced on Wednesday, comes as it looks to widen its base from traditional brick-and-mortar retail business and as domestic retailers battle to keep customers from switching to the likes of online giant Amazon.com Inc.
"From Wesfarmers' point of view, it gives them the digital and e-commerce capabilities that they were trying to build... you can either spend 10 years building it up, or you can go and buy one, and they've gone and bought one," said James McGlew, executive director of corporate stockbroking at Argonaut.
The firm, which started trading out of two small rooms in Perth and now employs 217,000, sold out of coal mining last year and spun out its low-growth grocer Coles. It has looked to expand into high-tech minerals this year, with plays for lithium miner Kidman Resources and rare-earth producer Lynas Corp.
Wesfarmers' online push and drive to diversify comes at a time when shoppers in Australia have tightened their purse-strings in response to rising household debt, tepid wage growth and a steep property downturn.
Catch Group Holdings Ltd, formerly Catch Of The Day, started in 2006 and offers discounted deals on brands such as Nike and Armani Jeans. For the half-year to December its gross transaction values rose 62% to A$254 million, according to the Australian Financial Review.
"Australia is embracing e-commerce at an accelerated rate, with online goods spend reaching 10% of total retail at
the end of 2018, two years ahead of our prediction," said Ben Franzi, a general manager at Australia Post in a report.
Catch Group management has said it has benefited from the launch of Amazon's Australian site in late 2017, with more customers shifting to online shopping as a result.
The online retailer was likely eyeing Wesfarmers' "critical mass of product lines to get out there in an already existing business," said Argonaut's McGlew.
Wesfarmers said that subject to completion, Catch Group will operate as an independent business unit under Ian Bailey, the managing director of Kmart Group, Wesfarmers' low-priced retail chain.
The conglomerate said the A$230 million ($159.9 million) acquisition will be funded from its existing debt facilities.
Wesfarmers shares, already at record highs, gained 0.6% to A$38.80 in early trade, in line with the broader market's 0.5% rise.
($1 = 1.4386 Australian dollars)
(Reporting by Aby Jose Koilparambil and Devika Syamnath in Bengaluru; Additional reporting by Ambar Warrick; Editing by Stephen Coates and Muralikumar Anantharaman)