Grocery and liquor wholesaler Metcash is acquiring Franklins supermarket chain for $215 million, increasing 85 branches in New South Wales.

The takeover will allow Metcash to gain an extra $500 million in wholesale revenue a year, the company said in a statement earlier today. Wholesale sales in the year ended April 30 jumped 4.9 per cent to $11.5 billion.

Metcash plans to sell the Franklins outlets to independent IGA retailers, expanding the proportion of stores provided by the wholesaler in NSW to 17 per cent from 11 per cent. The major grocery wholesaler proposed to implement a store sale scheme after completely selling the stores to retailers.
According to the company's chief executive Andrew Reitzer, the IGA network would greatly strengthen its competitive standing against the national chains in Australia's biggest grocery market, NSW.

''Metcash expects the independent retailers who purchase the stores will lift each store's performance through the successful combination of their own retailing expertise and through utilising the strength, services and support provided by Metcash,'' Mr Reitzer said.

The takeover is Metcash's first since cutting a deal in December to buy home-improvement retailer Mitre 10 Group.

Advised by Freehills, the transaction is still subject to approval from the Australian Competition and Consumer Commission. It would be funded from existing Metcash bank facilities.

Shares of Metcash upsurged after the news. In recent trading, its value increased 14 cents, or 3.3 per cent, at $4.33, beating the general market which plunged more than 1 per cent.