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Supermarket operator Foodstuffs has joined forces with Pacific Equity Partners to consider a takeover of The Warehouse Group.
Foodstuffs yesterday applied to the Commerce Commission for clearance to buy The Warehouse outright, but its chief executive Tony Carter said it had not yet made a decision to bid
for the company.
However, Carter said The Warehouse would be "a good fit" with Foodstuffs, which operates 625 food stores and supermarkets around New Zealand.
"We continue to hold the view that The Warehouse is a well-run business in the retail sector and has a similar culture to Foodstuffs, with both companies New Zealand-owned and controlled."
He said Foodstuffs had met Warehouse founder and majority owner Stephen Tindall.
"That is as you would expect when we are a big shareholder and so are they, but those discussions are confidential," he said.
Carter declined to comment on whether Foodstuffs was working with Australia's Pacific Equity Partners (PEP) on the potential acquisition, but the Business Herald understands they are working together on a bid.
PEP had originally been in partnership with Tindall in his failed privatisation bid for the company. That did not proceed after Australian retailer Woolworths took a 10 per cent stake in The Warehouse, paying significantly more than Tindall had indicated he would pay.
It is understood PEP was paid compensation by Tindall after his $1.8 billion bid did not proceed.
In a brief statement, the commission said: "In considering the application, the commission's role is to determine whether the acquisition has the effect of substantially lessening competition in a market."
Foodstuffs is New Zealand's largest grocery retailer and has about 57 per cent of the grocery market.
The Warehouse has this year entered the grocery market for the first time, opening Warehouse Extra stores in Auckland's Sylvia Park shopping centre and in Whangarei.
When Tindall announced his plan to take over The Warehouse and take it off the sharemarket in September, he said he wanted to roll out grocery stores to more than The Warehouse's 85 Red Sheds and he did not believe other investors would want to share that risk.
Foodstuffs' application to the Commerce Commission was made after the sharemarket closed yesterday.
Shares in The Warehouse closed up 2c at $6.92. This gives it a market worth of $2.1 billion. The company's stock has climbed from a low of $3.47 this year to as high as $7.05 as corporate activity around it has increased.
Tindall has only recently confirmed that he would consider selling his stake in The Warehouse.
Despite acquiring a 10 per cent stake in The Warehouse earlier this year, Foodstuffs was not considered by observers to be a serious bidder. Many saw its stake as an attempt to block any other retailer taking over.
Woolworths has been considered the most likely bidder for The Warehouse. The Australian retailer has much deeper pockets than Foodstuffs and is known for its aggressive approach on acquisitions.
Foodstuffs - a co-operative of three companies - has not been considered to have the management structure and financial might to move swiftly.
If Foodstuffs were to bid for the company it would have to get around Woolworths' 10 per cent blocking stake, which could force it undertake a merger with The Warehouse instead of a full takeover.
