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Shares in The Warehouse Group surged as much as 25 per cent today after the High Court granted supermarket giants Woolworths and Foodstuffs permission to bid for New Zealand's biggest discount retailer.
Warehouse stock climbed to as high as $6.21 after touching $4.94, the lowest in more than
a year in early trading today. The shares gained $1.16, or 23 per cent, to $6.13 by 2.37pm.
Today's decision effectively overturned an earlier ruling by the Commerce Commission that blocked Australia's largest supermarket chain, Woolworths, and its New Zealand rival, Foodstufffs, from acquiring the Auckland-based Warehouse Group.
The Commerce Commission in June halted attempts by the Australasian supermarket chains to buy Stephen Tindall's company on the grounds that it would "substantially reduce competition" in the New Zealand retail market.
"The speed at which the decision came out suggests that the Commerce Commission's case was perhaps not as strong as it thought," said Paul Robertshawe, who owns Warehouse shares among the $800 million of Australasian stocks he helps manage for Tower Asset Management in Wellington.
Mr Robertshawe said the direction of The Warehouse's share price in the near term would depend on whether the anti-trust regulator appeals.
The Commerce Commission said it was "disappointed" by today's ruling. It will now consider whether or not it will appeal.
The rival chains, which already each have 10 per cent of The Warehouse, spent two weeks in late October and early November presenting their cases to the court.
The matter was heard by Justice Jill Mallon and court lay member Professor Stephen King, a commissioner on the Australian Competition and Consumer Commission.
Much of the hearing was held in confidential sittings due to concerns about commercial sensitivity.
Foodstuffs, owner of Pak 'n Save and New World, welcomed the High Court's decision and it will now be turning its focus to a number of options.
"Any moves from ourselves or Woolworths, or any other potential party, will take time to run their course so our position will be a measured one," managing director Tony Carter said in a statement.
Warehouse shares have drifted in recent months amid uncertainty about the company's future.
Forsyth Barr analyst Guy Hallwright deems the stock to be overvalued at current levels, saying it is being driven purely by the takeover issue.
"It's not trading on fundamentals," he said.
He currently values the stock at $4.26 apiece and has a "hold" recommendation.
- additional reporting by NZPA