Foodland: no store closures

By Nick Smith

Friday 10th May 2002

Supermarket owner Foodland Associated is denying it will close a host of stores if it succeeds in its bid for Woolworths.

Executives have also zipped lips as talks between Foodland and Woolworths' owner, Diary Farm International, reach a delicate stage and speculation mounts of a bidding war.

Global giant Aldi is said to be interested in the supermarket chain, while Woolworths Australia's share price has boomed after it was reported to have revived its interest in its New Zealand namesake.

Foodland subsidiary Progressive Enterprises, which has just appointed Richard Umbers chief executive, said it was making no comment about its bid - reported in Food Industry Week as $600 million - other than to confirm it is meeting with Dairy Farm.

Managing director Ted van Arkel: "We need to cement the deal before we can make any public statement. We are re-establishing dialogue with Dairy Farm."

He confirmed two stores identified by the Commerce Commission in its original decision at Te Awamutu and on Auckland's North Shore would close if it bought Woolworths.

But he hotly denied other closures: "We have no thoughts of closure because [Woolworths] is a profitable business and will increase our market share accordingly."

The National Distribution Union, which represents employees at Woolworths and the Progressive chain, said a merger would result in job losses only at a management and distribution level.

Retail secretary Peter Monteith said apart from the two supermarkets identified by the commission, there would be no closure of competing stores in the same area.

"Our expectation is that they will not close many because most don't directly compete with one another," he said. "You wouldn't operate two full service supermarkets right next to each other but you would operate a discount next to a full service."

He suggested some supermarkets would be rebranded as either discount or full service, while other factors such as long term leases would also prohibit a premature sale.

While Aldi has long signalled its intention to expand into the market, Mr Monteith pointed to Woolworths Australia, which employs a former Dairy Farm chief financial officer as director of supermarkets.

"Woolworths' share price has gone up [on the basis it will bid for its Kiwi namesake]," he said. "There's a lot of water to go under the bridge [before Foodland buys Woolworths]."

But Mr van Arkel said the company would not have spent $3.5 million in legal fees if a sale was not a real possibility.

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