Foodstuffs holds Warehouse key

Stephen Tindall

Foodstuffs could prove to be a stumbling block to Stephen Tindall's audacious plans to privatise The Warehouse, with the supermarket co-operative yesterday reiterating that it was a long-term shareholder in the discount retailer.

Foodstuffs chief executive Tony Carter said he was "surprised" when he was advised about the proposal, the same time as media were being invited to a press conference in Auckland.

Carter said it was too early to form a view on the proposal on what Foodstuffs would do with its 10 per cent stake in the company - enough to block a full takeover bid - but his position had not changed.

"We said at the time of buying we saw it as a long-term strategic investment and that's still our position," he said. "It's a surprise to us and really too early - there's no detail - to form a view on it. It [today] will be a very interesting day."

Tindall said he had formed a consortium with Australian private equity business Pacific Equity Partners (PEP) and they were aiming to take The Warehouse off the sharemarket and privatise it.

They will offer $5.75 a share - compared with yesterday's closing price of $5.11 - in a bid which values the company at $1.8 billion.

Tindall said he expected Foodstuffs would accept the "demonstrably attractive offer" and, while it may have invested for strategic reasons, it would also want to make money.

The "full-and-fair" $5.75 offer was a 22 per cent premium on the average broker valuation on the stock of $4.70.

The Warehouse also had about $100 million worth of tax credits which would be distributed to shareholders.

Andrew Barclay, head of investment at Goldman Sachs JBWere in New Zealand and an adviser to PEP, said the tax credits could boost the price paid to shareholders by a maximum of 30c a share.

However, Citigroup's Australia-New Zealand equity sales director, Grant Taylor, described the share offer as "opportunistic" and compared it with a bid for Coles Myer in Australia.

"Although The Warehouse is not an exact replica of Coles, there are similarities," said Taylor.

"At $14.50, the Coles bid is on a 23 times PE. This bid, on the assumption of 30c of imputation credits, is on a PE of 17.5."

Taylor said The Warehouse was rebuilding from its disastrous foray into Australia and shareholders would expect shares to increase in value.

Tindall said he had decided on privatisation about six months ago after the "rocky patch" for The Warehouse share price during problems with the Yellow Shed investments.

The company faced similar share-price volatility over the rollout of its food retailing strategy, which would be "risky".

"The market works in short-term ways and this will give us the opportunity to deliver results over a long period," Tindall said.

"The strategy that the company has already declared is similar going forward. I think we can do it so much better under a private vehicle.

"We believe this secures the long-term future and is the best thing for customers and shareholders."

As for his choice of PEP as his partner for the consortium, Tindall said he had chosen the partnership after an extensive search. "I chose them because of their international expertise in retail privatisation.

"They have a number of people on board and they're specialists on how you grow business and reduce costs."

Tindall was still finalising the shareholding but it was fair to say he would be holding more than 51 per cent of shares after the bid.

He now holds 27 per cent of The Warehouse, the Tindall Foundation 21 per cent, with family trusts taking the total Tindall interest up to 51 per cent. The takeover will be financed by a consortium of banks.


Stephen Tindall

* Owns a little more than 50 per cent of The Warehouse - New Zealand's biggest retail chain - either directly or through The Tindall Foundation, a charitable organisation he set up in 1995 with wife Margaret.

* He founded The Warehouse in 1982, with one store on Auckland's North Shore and $40,000 capital. The company floated on the NZ Stock Exchange in 1994. The chain now numbers more than 128 stores. Tindall stepped down as managing director in 2001 to focus on the Tindall Foundation and his private "innovation investment" scheme.

* Tindall's wealth is estimated in this year's NBR Rich List at $412 million, up from $395 million last year. He was 26th in the Listener's 2005 Power List, down from 17th in 2004.

* The Warehouse is still recovering from its foray into Australia in 2000, in which it paid $114 million, plus $35 million of debt, for discount chains Silly Solly's and Clint's Crazy Bargains. It sold the "Yellow Sheds" in 2005 for A$92 million ( $98 million).

* The Warehouse this year entered liquor and grocery retailing with Warehouse Cellars at Fraser Cove, Tauranga, and The Warehouse Extra at Auckland's Sylvia Park.

* Tindall, a great-grandson of department store founder George Court, has five children. He was named this year's Sir Peter Blake Leadership Awards' Blake Medallist and an Officer of the New Zealand Order of Merit (ONZM) in 1997.

- Additional reporting Martha McKenzie-Minifie and Liam Dann