After the price war on fresh produce between supermarket giants Coles and Woolworths, industry observers are anticipating another price battle, this time on hardware items. The price war could be the result of Metcash's purchase of Mitre 10.

Metcash actually controls 50.1 per cent of Mitre 10 prior to its full purchase. Mitre 10 has 400 outlets that include True Value store and distribution arrangement with 400 non-branded independent hardware stores.

The buy-in by the grocery wholesale would provide Metcash with a hardware that could compete head on with Bunnings and 13 hardware stores of Woolworths. Wesfarmers, which owns supermarket giant Coles, operates 202 Bunnings outlets, while rival Woolworths - besides the 13 hardware outlets it opened the past nine months, plans to open 150 Masters hardware outlets in the next five years.

However, Metcash Chief Executive Andrew Reitzer said the grocer's purchase of Mitre 10 is subject to the hardware's accounts for the year ending June meeting expectations.

"This acquisition will provide an enhanced ability for Metcash to leverage its proven merchandising and brand management skills and world class logistics capability," Mr Reitzer was quoted by The Herald Sun.

In financial year 2011, Metcash reported underlying earnings of $256.2 million.

Metcash paid $55 million two years ago to acquire the initial 50.1 per cent stake of Mitre 10. For the remaining 49.9 per cent stake, Metcash is expected to pay Mitre 10 owners up to $80 million over the next two years although Mr Reitzer had estimated the second buy-out to be from $50 to $60 million.

Most of Mitre 10 shareholders, who are also individual store owners, will receive a payout for their shares.

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