Woolworths and Foodstuffs, both potential bidders for The Warehouse, played their cards close to their chests after an impediment to bids was removed today.
The Warehouse shares soared 12.94 percent today after the retailer retreated from large-scale grocery retailing, making it easier for a supermarket chain to take it over.
The Warehouse is closing down its Warehouse Extra stores at a cost of $12 million because people shopping for food did not buy as much general merchandise as hoped.
The withdrawal was significant because Foodstuffs and Woolworths were prevented from bidding for The Warehouse by the Commerce Commission because of The Warehouse's potential to compete in grocery retailing.
Key to that potential was the Warehouse Extra stores.
Foodstuffs and Woolworths both have 10 percent of The Warehouse and founder Stephen Tindall and family interests have 52 percent, making for an interesting corporate situation.
Woolworths said it was evaluating its appeal to the Supreme Court challenging the Commerce Commission's decision.
Foodstuffs managing director Tony Carter said his advice was that there was now nothing to prevent either Foodstuffs or Woolworths from bidding. "We wouldn't rule anything in or anything out," he said.
He said Foodstuffs was talking to "lots of people" but would not confirm if one was Pacific Equity Partners.
Woolworths said it has not made a decision in respect of its shareholding in The Warehouse or any proposal.
"Woolworths continues to monitor the performance of The Warehouse, the New Zealand retail climate, financial market conditions and the outlook for the New Zealand economy."
It is believed that the Tindall camp has not had formal talks with anyone and is watching to see what develops.
Mr Tindall, who has previously failed to take the company private, is not necessarily a seller.
The Commerce Commission said its existing decision is subject to appeal so it could not comment.
Analysts said it was most likely that a bidder would just apply again. The commission does not revisit old decisions when circumstances change.
The Warehouse's shares closed up 40 cents at $3.49.
James Smalley, a client adviser with Hamilton, Hindin, Greene, said the share price had had a takeover premium added to it.
The Warehouse's move into food retailing had been highlighted as a reason for turning down the supermarket companies, he said. So an impediment had been removed.
Chairman Keith Smith said the "company's aspiration to achieve the critical 10 percent halo benefit in general merchandise and apparel" would not be realised.
This is the effect of increasing sales of general merchandise to shoppers who came in to buy food.
"As a consequence of this, the Extra strategy will not meet our return on investment criteria."
Fresh produce, meat and frozen foods will be withdrawn from the three existing Extra stores within the next six months.
The pharmacy and health and beauty category areas are to remain.
"A decision has yet to be made in respect of liquor currently ranged in six of the company's 85 stores."
Managing director Ian Morrice said the Extra stores had been an important trial for the retail chain.
Foodstuffs and Woolworths together have about 96 percent of the grocery market in New Zealand.
Foodstuffs runs New World, Pak'nSave and Four Square stores. Woolworths has Woolworths, Countdown, Foodtown, Supervalue and Fresh Choice stores.
Mr Tindall has previously said he would act with integrity and in the best interests of shareholders, customers, staff and the community when deciding what he did.
