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…

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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.

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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.

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