Woolworths (ASX:WOW) share price higher on PFD acquisition news

The Woolworths Group Ltd (ASX:WOW) share price is on the move on Tuesday following an update on its proposed acquisition of PFD…

| More on:
The last piece of the jigsaw being fitted, indicating good news for a share price on merger or acquisition

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Woolworths Group Ltd (ASX: WOW) share price is pushing higher again on Tuesday.

In morning trade, the retail conglomerate's shares are up 1% to $41.00.

What is moving the Woolworths share price today?

This morning the Australian Competition and Consumer Commission (ACCC) provided an update on its thoughts on Woolworths's proposed acquisition of leading foodservice supplier PFD Food Services.

This followed the receipt of responses from Woolworths and PFD in relation to the ACCC's statement of issues in December. That statement outlined preliminary competition concerns.

According to the release, Woolworths and PFD have offered a draft behavioural undertaking designed to maintain a degree of separation and independence between the two parties for three years after the acquisition, but the duration could be shorter in certain circumstances.

The ACCC is now seeking views on a proposed undertaking offered by Woolworths and PFD.

ACCC Chair, Rod Sims, said: "The release of an undertaking for public consultation should not be viewed as a sign that we will ultimately accept it, or any other form of undertaking."

"We are seeking feedback from market participants about whether the proposed behavioural undertaking is likely to address competition concerns raised by Woolworths' acquisition of PFD."

What are the temporary measures?

The release explains that Woolworths and PFD have indicated that the temporary measures in the draft undertaking are designed to preserve the current market dynamics and enable market participants, such as independent suppliers, to continue to do business with Woolworths and PFD independently.

They believe that this will allow the market to adjust to Woolworths and PFD ceasing to be independent of each other.

The proposed undertaking would also place obligations on PFD's board and governance structure and impose confidentiality protocols regarding certain supplier information.  These obligations are intended to last three years, unless certain early termination clauses are triggered.

In addition, PFD would be required to implement a charter in dealing with suppliers which reflects certain principles of the Food and Grocery Code of Conduct. This will need to be in place for five years, with any changes to the charter needing to be approved by the ACCC.

Mr Sims concluded: "The undertaking is behavioural in nature and imposes obligations on the companies to act in certain ways and not undertake certain actions. It will be important to get feedback from market participants on whether the undertaking provides a sufficient remedy to address the competition concerns."

Judging by the Woolworths share price performance today, investors appear optimistic this development will be enough to get the deal over the line.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers

A cool dude looks back at the camera while ziplining above the treetops.
BNPL shares

Zip share price rockets 19% on full-year earnings upgrade

Surging again today, Zip shares are now up 127% since their recent April lows.

Read more »

happy teenager using iPhone
Share Gainers

Up 96% since April, should I still buy Life360 shares today?

A leading expert offers his verdict on the growth outlook for the surging Life360 share price.

Read more »

Businessman smiles with arms outstretched after receiving good news.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a lucrative return to trading for investors this Tuesday.

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Share Gainers

Why Austal, Botanix, DroneShield, and NextDC shares are storming higher today

These shares are starting the week with a bang. But why?

Read more »

A female coal miner wearing a white hardhat and orange high-vis vest holds a lump of coal and smiles as the Whitehaven Coal share price rises today
Share Gainers

The Coronado Global share price just surged to a 114% weekly gain. Here's why

Investors have sent the ASX coal stock flying higher in June. But why?

Read more »

Market up or down
Share Gainers

Here are the top 10 ASX 200 shares today

ASX investors had a rough end to the week...

Read more »

Man in an office celebrates at he crosses a finish line before his colleagues.
Share Gainers

4 ASX 200 shares racing ahead of the benchmark this week

ASX investors sent these four stocks soaring 12% to 18% this week. But why?

Read more »

Man pointing an upward line on a bar graph symbolising a rising share price.
Share Gainers

Why BHP, Coronado Global, EBR Systems, and Whitehaven Coal shares are pushing higher today

These shares are ending the week on a positive note. Let's find out why.

Read more »