Foodland hints at dual listing

New Zealand investors could yet get a taste of the country's second-largest supermarket chain.

Foodland chief executive Trevor Coates has told the Business Herald that it would make sense for the new company created by a planned demerger of its New Zealand supermarket assets to consider a dual listing on the New Zealand Stock Exchange.

"Commonsense would suggest that, in due course, the board of the separate new listed company would give that consideration," he said from Foodland's Perth headquarters.

Hopes for any New Zealand listing of the assets - the Foodtown, Countdown and Woolworths chains - were dampened by Foodland's decision last week to choose the Australian Stock Exchange as the venue for its planned demerger.

The spin-off is a defence strategy against a hostile bid for Foodland by Australian grocery wholesaler Metcash Trading, which had also proposed spinning off the New Zealand businesses on to the ASX.

While Coates' statement appears to open an avenue for the supermarkets to fall into local hands, the chances of a float here are still relatively slim.

A trade buyer is expected to emerge for the assets before they make it to market - and if not by then, shortly afterwards. Last week, Woolworths Australia chief executive Roger Corbett said his company would "certainly" look at the New Zealand supermarkets, although he noted they operated in a competitive market.

Rival Coles Myer was named in the Grant Samuel report that Foodland commissioned on the Metcash bid as another likely buyer. Some analysts here have also speculated about the possibility of a bid by The Warehouse.

Coates would not be drawn on whether any firm approaches had been made, although he said the company's investment bankers ABN AMRO had been fielding calls and interest before Christmas.

However, he said that, in general, trade sales created more value for shareholders than initial public offerings.

He would not comment on whether he believed that would be the case with the New Zealand supermarkets.

While the demerger plans were seen by some as an admission that there were not significant synergies from owning Australian and New Zealand supermarkets, Coates strongly rejected that view.

"It would depend on the scale of the business you already have as a buyer," he said. "It is not difficult to imagine substantial benefits from exploiting scale."

Foodland had achieved its target of taking over A$55 million in costs out of the New Zealand business when it blended Woolworths New Zealand with Progressive Enterprises, the holding company for Foodtown and Countdown.

Coates said the New Zealand supermarkets had strong brands and Foodland had proved the business could be grown "quite substantially" through organic growth.

He was aware of interest in a listing by New Zealand investors, but a dual listing had not been considered as part of the demerger plan because it was already complex and the Australian exchange offered better liquidity.

If Foodland's New Zealand assets were eventually to come to the NZX it would be full circle for the supermarkets. Progressive opened its first Foodtown supermarket in Auckland in the 1950s and, after listing in 1971, was one of the best performers on the exchange in the late 1970s and early 1980s. But Coates said Foodland had previously had a dual listing and its shares were not traded much.