A merger of Home Timber & Hardware and Mitre 10 has been finalised, creating a new $2.2 billion hardware giant set to take on Bunnings.
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Mitre 10's owner Metcash announced on Wednesday it would buy the Home chain, which has over 400 stores, from Woolworths for $165 million, creating a new 900-store player in the sector.
Woolworths put Home on the market after deciding to exit hardware, including its loss-making Masters chain.
"The combination of the two businesses will mean that Metcash's hardware business will have a turnover of [about] $2 billion," Metcash chief executive Ian Morrice said.
"This increased scale, together with the opportunity to realise significant efficiencies, will enable us to be more competitive and deliver a better outcome for both our hardware retailers and their customers."
Metcash said it would close Home's Victorian distribution centre in Dandenong, which was no longer needed under the new combined business, and would shut two loss-making Home stores.
There are 43 company-owned Home stores and 363 independent stores that carry its brand, including a number in Bendigo and central Victoria.
Home also supplies goods to 865 unbranded stores, bringing the total network to over 1200.
Like Metcash's supermarket business, IGA, most of its 400 Mitre 10 stores are independently owned.
Metcash faced competing bids from Dick Smith's former owner Anchorage Capital and private equity giant Blackstone.
The competition watchdog, the Australian Consumer Competition Commission, gave the go-ahead for the proposed merger last month.
Woolworths is also looking to sell or wind up its stake in its loss-making hardware chain Masters. According to the Financial Review, the Masters' property and inventory assets are set to be sold separately.
Woolworths is already facing increased competition in its core supermarket business brought about by new entrants such as Aldi, contributing to its first loss in 23 years in February.
Last month, it announced a restructure including job cuts and store closures.
Woolworths reports its results on Thursday, with analysts predicting a $1b loss.