Merger talks between Warehouse and Millers deepen

By NZPA

Tuesday 23rd August 2005

Millers Retail, the Australian discount chain mooted as a potential tie-up with The Warehouse has received a "please explain" notice after an 11.5% run in its share price last week.

The Australian Stock Exchange (ASX) yesterday queried a rise in Millers' shares, which raced up nearly 12% in two days last week from A77c (NZ84c) to A88c.

The Warehouse revealed in June it is looking to merge its troublesome Australian "Yellow Sheds" chain with rival Millers and then sell off the joint operations.

The enlarged discount variety business would generate sales of about $A1.3 billion and have a market share of 14%, making it more competitive against the dominant Australian players, Coles and Woolworths.

The Warehouse today declined to make any further comment, but the pair are rumoured to be close to announcing a formal merger proposal.

An unsourced report in The Australian newspaper today said the packaged discount variety group will likely be on-sold for about $A200 million, to private equity firms Allco Equity Partners, Castle Harlan Australian Mezzanine Partners, Archer Capital and Catalyst.

"We made a comment to the New Zealand Stock Exchange on June 27 and we have got no further comment to make," The Warehouse's investor relations spokesman Mark Fennell said.

Brokers see the likely sale as positive because The Warehouse's Australian operations have been a drain on cashflow and profits.

Millers also referred to its June statement in response to the ASX query. The retailer said it advised the market in June that it was conducting a group review, with an emphasis on the troubled discount variety business.

Millers said that review included divestment opportunities but that no decision had been made.

"The company has no other explanation for the recent price changes in its securities," Millers stated.

Millers shares rose 1.5c today to A85c.

The company is due to report its full-year result soon. That could be a fitting time for any merger announcement to be made.

Shares in The Warehouse fell 4c to $NZ3.68 by late afternoon.

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