Tindall regrouping after Woolworths Warehouse raid

A $200 million raid today by Australian supermarket giant Woolworths for 10 per cent of The Warehouse has forced founder Stephen Tindall to rethink his planned $1.8 billion takeover bid.

Mr Tindall in a consortium with Pacific Equity Partners has been planning to offer shareholders $5.75 cash per share in a bid to take The Warehouse private.

While his clear preference was to privatise, he said he was reassessing the situation after today's raid.

"We need to understand the motivations and intentions of the new shareholder, and the implications of this for all shareholders and other stakeholders," he said in a brief statement late today.

Woolworths refused to comment on its motives.

Its move means the two companies that share New Zealand's grocery business between them, now each have stakes that could block any takeover attempt for the discount retailer.

In June and July, Woolworth's New Zealand supermarket rival Foodstuffs bought 10 per cent at prices around $5 a share.

Today, Woolworths announced it had bought 30.55 million shares in The Warehouse. Most were bought overnight at $6.50 a share, with the total cost coming to $196m.

Mr Tindall, his family and associates, and his charitable foundation, own just over half The Warehouse.

Brokers said Mr Tindall's offer at $5.75 per share, even with a mooted 30 cents per share special dividend, was a non-starter.

"Obviously with two others involved now it's a dead duck really for Tindall under his current structure," said ASB Securities brokers Stephen Wright said.

Another possibility was that either Woolworths or Foodstuffs might have to be included in any privatisation consortium.

An Australian analyst, who declined to be identified, said The Warehouse had a fantastic footprint in New Zealand where Woolworths wanted to expand into general merchandising. At the same time the move countered a Red Shed threat to Woolworths' groceries business.

Goldman Sachs JBWere investment manger Shane Solly said the future of The Warehouse was wide open.

Its assets were valuable and bids for it could go much higher.

BT Funds Management equities portfolio manager Paul Richardson said Woolworths could possibly use its stake to prevent any link up between rival Foodstuffs and The Warehouse.

"It does look like there are a number of parties very keen on exerting influence on the future of The Warehouse ... so this could go on for quite some time," he said.

Last year Woolworths paid $2.6 billion to take over Progressive Enterprises, owner of the Foodtown, Woolworths and Countdown supermarket chains.

Woolworths has 43 per cent of the groceries market and Foodstuffs has 57 per cent.

Last month Woolworths said the company would significantly reduce costs in New Zealand by taking advantage of its systems and technology.

It planned to open more supermarkets in New Zealand and was considering new liquor outlets and perhaps general merchandise.

Meanwhile, The Warehouse is moving further into groceries along the lines of its recently opened "hypermarket" in Sylvia Park, Auckland.

Woolworths chief executive Roger Corbett said that since Woolworths bought Progressive last November the New Zealand division had made sales of $2.9 billion, with earnings before interest and tax of $122.5 million.

When Foodstuffs launched its bid for The Warehouse in June, The Warehouse board believed the move was defensive one aimed at trying to limit its expansion into the grocery business.

The $6.50 being offered by Woolworths for The Warehouse shares was 45c above yesterday's closing price. Once Woolworths reached the 10 per cent level the share price fell back and by late afternoon it was at $6.45.

- NZPA