Warehouse shares surge as Foodstuffs seeks 10%

By NZPA

Wednesday 7th June 2006

Shares in The Warehouse Group surged more than $1 this morning after New Zealand's three Foodstuffs companies announced they were to stand in the market for up to 10% of The Warehouse.

After closing at $3.91 yesterday, shares in The Warehouse were up $1.08 - more than 27% - shortly after the sharemarket opened today to $4.99, with 2.7 million shares having changed hands.

The Foodstuffs companies said they were offering $5 per share - a premium of 28% over yesterday's closing price, and a 31% premium over the three-month volume weighted average price (VWAP).

At that price, a 10% stake would cost $152 million.

Macquarie Equities investment director Arthur Lim said 10% was a blocking stake. He said it appeared to be a hostile operation, otherwise Foodstuffs would have first consulted with The Warehouse founder Stephen Tindall, who controls 52% of the company.

"It points to an undercurrent of bigger corporate activity behind the scenes in the retailing sector."

He said if Foodstuffs was looking for a full takeover, it would need Tindall on board.

Foodstuffs (New Zealand) Ltd managing director Tony Carter said the stake was a strategic long-term investment for Foodstuffs and there was no intention to move to a full take-over offer.

Asked if the 10% would be a blocking stake to prevent rivals gaining control of The Warehouse, he said that was not Foodstuffs' primary intention.

The Warehouse said it would issue a statement to shareholders this morning and recommended shareholders not sell before the statement was released.

ABN Amro said it had received instructions from Foodstuffs to buy up to 30,549,999 - 10% - of ordinary shares in The Warehouse.

At the time of its notice, shortly before the market opened at 10am, it had bought 5,116,091 shares - 1.7% - off-market from various parties.

Foodstuffs is the country's largest supermarket group with about $6 billion in annual turnover. It has about 55% of the New Zealand grocery market. It is a co-operative broken into three regional co-operatives with a central co-ordinating body, and operates the Pak'N Save, New World and Four Square chains.

The Warehouse is to go head-to-head with existing supermarket operators from tomorrow, when it opens its Warehouse Extra store in the massive Sylvia Park shopping centre in Auckland.

At 12,500sq m, The Warehouse Extra store is being touted as the first store in Australasia to offer customers a Walmart-style non-food and food product range under one roof.

The Warehouse said that as well as the general merchandise and apparel usually found in its stores, customers would find fresh food, a full grocery range, wine and beer, an in-store pharmacy, a cafe and a bakery.

Carter said that Foodstuffs had decided to go after 10% because it was seen as an achievable target.

The $150m cost of the stand could be funded out of working capital.

He had phoned Tindall this morning, but the possibility of him selling his stake had not been discussed, and it was too early for other discussions.

"If Stephen were to sell, we would then be required to make a full takeover offer and that's not our intent," Carter said.

It was "absolutely coincidental" that The Warehouse was opening The Warehouse Extra store tomorrow, something he had been unaware of until yesterday.

"Needless to say, I'm not invited," Carter said.

The possibility of an alliance between The Warehouse and Foodstuffs could be explored in time, but Commerce Act regulations and other such issues would need to be worked through.

Foodstuffs would not be seeking representation on The Warehouse's board, and was comfortable with the management of The Warehouse.

Carter said The Warehouse was seen as an attractive investment opportunity.

"It is a well-run business in the retail sector which we know and understand, and being New Zealand-owned and controlled its culture is similar to ours," he said.

Comments from our readers

No comments yet