Foodstuffs stalls at 5.6pc of Warehouse

Grocery co-operative Foodstuffs' $150 million bid to protect its share of the grocery market stalled after its sharemarket raid on rival The Warehouse closed yesterday just over half filled.

At the close of play yesterday, a consortium of the three regional Foodstuffs co-operatives had 5.64 per cent of the retailer's shares - well short of the 10 per cent it was looking for.

Foodstuffs insisted it was buying the stake as an investment.

But investors saw it instead as an attempt to gain leverage over the retailer as it launched into grocery sales. The Warehouse yesterday opened the doors of the 12,500sq m Warehouse Extra - its first hypermarket with full grocery, pharmacy, liquor, bakery and general merchandise sections - at the new Sylvia Park shopping centre in Mt Wellington.

The 10 per cent stake would have given Foodstuffs, the country's largest supermarket group with about 57 per cent of the grocery market and $6 billion of sales, enough to block a long-rumoured takeover by giants such as Woolworths, Britain's Tesco or Wal-Mart of the United States.

It also could have used the stake as a lever to negotiate some form of co-operation with The Warehouse in the grocery market. Now it is left with nothing, leaving the door open to a higher offer to gain the stake it seeks.

Foodstuffs managing director Tony Carter said he was comfortable with the level of shareholding it had achieved and reiterated statements on Wednesday that it was a passive investor.

However, he warned against hopes for a higher offer.

"Some investors may have been buying shares over the last day or so in the expectation that we are about to launch a full takeover or increase our bid price, and we have no intention of doing either."

He highlighted the $5 bid price was a 28 per cent rise above the $3.91 the shares closed at on Tuesday, the day before Foodstuffs disclosed its plan, and a 31 per cent premium to an average of the past three months.

The shares last night closed down 2c at $5.06 amid investor hopes of a higher offer from either Foodstuffs or another buyer. Investors such as Tower Asset Management's Wayne Stechman said The Warehouse was worth more. "We do not regard the $5 as a super price. In the long term, there could be some value to extract," Stechman said, adding that he had sold a small number of shares into the offer as part of managing his portfolio.

The Warehouse founder, Stephen Tindall, who controls 51 per cent of the shares on his own account and through his Tindall charitable foundation, told the Business Herald that talk of an imminent takeover of the retailer was misplaced.

"Neither I nor the Tindall Foundation are sellers," he said.