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Warehouse ends extra rollout, boosting takeover prospects

By Paul McBeth

Thursday 9th October 2008

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Warehouse Group, the biggest retailer on the NZX 50 index, abandoned its strategy to expand into fresh groceries, stoking prospects of a takeover by one of the nation’s supermarket chains.

The company’s three existing Extra stores haven’t met economic targets, chairman Keith Smith said in a statement today. Exit and restructuring costs of as much as NZ$12 million will be taken against Warehouse’s 2009 earnings.

Shares of the Warehouse jumped more than 13% to NZ$3.50 after the announcement, on speculation it will improve the prospects of a takeover from Woolworths.

Australia’s biggest retailer last month sought leave from the Supreme Court to challenge a Court of Appeal decision that prevented it bidding for Warehouse.

“The price reflects that the Warehouse is back in play,” said Stephen Wright, an adviser at ASB Securities.

The Commerce Commission opposed the takeover bid by both Woolworths and rival Foodstuffs on the grounds that the Extra stores increased competition in the supermarket industry.

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