U.S. News

NZ's Warehouse Douses Talk of $1.6 Billion Woolworths Bid


New Zealand's largest-listed retailer, The Warehouse, said on Thursday it has not had any takeover offers, denying reports Australia's Woolworths had made a $1.6 billion bid.

The company was responding to talk Australia's biggest retailer had tabled a NZ$7.15 a share offer to the company in April, sending shares in The Warehouse up as much as 6.6% to NZ$6.57.

"The Warehouse confirms it has not received any offer from any company," Chairman Keith Smith said in a statement.

New Zealand's competition regulator, The Commerce Commission, is due to make a ruling by Friday on competing applications to buy The Warehouse from Woolworths and local private co-operative Foodstuffs.

Smith said The Warehouse had held conceptual discussions with Woolworths and Foodstuffs, in an attempt to clarify their intentions.

Woolworths had made a written offer of NZ$7.15 a share, subject to regulatory approval, an unnamed source had told Reuters.

Market rumors had also suggested Foodstuffs had verbally told The Warehouse it would offer up to NZ$7.75 a share.

Its shares last traded at NZ$6.53, having dropped sharply from a peak of NZ$7.32 in mid-April on concerns about delays from the regulator, which has deferred a decision on bids for The Warehouse four times.
No Bids

Woolworths and Foodstuffs both hold 10 percent stakes in The Warehouse, but both have said they would await the regulator's decision before deciding whether to launch takeover bids.

Brokers First NZ Capital have predicted a bidding war for The Warehouse could reach as high as NZ$8.00 a share, with both parties keen to deny its rival access to The Warehouse's 84 general merchandise outlets, which The Warehouse is gradually introducing grocery items into.

An NZ$8.00 a share offer would value the company at NZ$2.5 billion, or almost 13 times expected 2007 earnings before interest, tax, depreciation and amortization (EBITDA), well above the average 8.8 times earnings from recent transactions, First NZ Capital said.

Analysts have speculated that the commission's delay in making a final decision means it will decline both applications.

If that happens, both companies are expected to appeal to the High Court.

Woolworths said back in January that it had long-targeted The Warehouse, which operates the giant Red Shed stores, as the best way to access New Zealand's general merchandise sector.

The Warehouse's founder Stephen Tindall is likely to be pivotal in any bidding war, controlling around 50% of the company when combined with interests close to him.

The two chains already dominate grocery retailing in New Zealand, with Foodstuffs having about 53% markets share and Woolworths 47%.