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New Zealand Regulator Blocks Bids for Retailer Warehouse

Reuters
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New Zealand's competition regulator said on Friday it would not allow two suitors for The Warehouse Group to make takeover bids, sending shares in the retailer sliding as much as 8%.

Two grocery chains, Australia's Woolworths and New Zealand private co-operative Foodstuffs, both 10% shareholders in The Warehouse, had made applications to buy New Zealand's largest retailer of general goods.

Warehouse shares fell as much as 8.4% to NZ$6.00 and were last trading down 7.8% at NZ$6.04. Analysts have said a bidding war, which Woolworths would be the favorite to win, could drive the price as high as NZ$8.00 a share, valuing the company at around NZ$2.5 billion (US$1.9 billion).

"The Commission was not satisfied that either of the proposed acquisitions will not have, or would not be likely to have, the effect of substantially lessening competition in the relevant markets," Commerce Commission Chairwoman Paula Rebstock said in a statement.

Foodstuffs operates the Pak'n'Save and New World chains and has around a 56% share of the grocery market. Woolworths operates in New Zealand through Foodtown, Countdown, Woolworths and Supervalue supermarkets and has 44% market share.

The Warehouse board issued a brief statement saying it would review the written decision before further comment.

Foodstuffs and Woolworths are expected to appeal the regulator's decision to New Zealand's High Court.

On Thursday, the Warehouse said it had spoken with both suitors about their intentions should they make any bid, but denied that it had received a NZ$7.15 a share bid from Woolworths, worth NZ$2.2 billion.

The Warehouse's founder, Stephen Tindall, still controls 51% of the stock, and has yet to make a public comment on the competing interests for the company.

The Warehouse has recently started to sell groceries at some of its larger stores and is expanding into hypermarkets, and analysts said neither of the two bidders would want to see the other gain access to The Warehouse's stores.

Last October Tindall scrapped a NZ$866 million plan to buy out the other half of The Warehouse, backed by private equity firm Pacific Equity Partners. Tindall had said the move to hypermarkets was a risky one better suited to private ownership.

Tindall withdrew the offer after the share price surged well above his NZ$5.85 offer price, as Woolworths joined Foodstuffs as a 10% shareholder. Shares were trading around NZ$3.60 last June prior to Tindall's bid.

On March 9, The Warehouse reported a net profit after tax of NZ$61 million for the six months to Jan. 28, and forecast a full year profit around NZ$96 million.