Christopher Adams: Warehouse sale marks the end of long retail battle

Sir Stephen Tindall seems to have no need to cash up his Warehouse holding. Photo / Dean Purcell

The final chapter in a long-running New Zealand retail battle played out this week when Woolworths offloaded its shares in The Warehouse Group.

The Australian grocery giant, which runs Countdown on this side of the Tasman, divested its remaining 8.8 per cent stake in the Red Sheds operator in an off-market sale to James Pascoe, the operator of Whitcoulls and Farmers, owned by David and Anne Norman, for $87.1 million.

Woolworths purchased a 10 per cent shareholding in The Warehouse in September 2006, effectively blocking New Zealand-owned supermarket operator Foodstuffs - which already had a 10 per cent stake - from making a takeover bid. At that time the big box retailer was attempting to break into the grocery market through its Warehouse Extra concept, which it later ditched.

However, in 2007 the Commerce Commission denied Woolworths and Foodstuffs permission to launch takeover bids for The Warehouse, citing the impact on market competition such a buy-out could cause.

The Normans' increasing interest in the NZX-listed retailer finally provided Woolworths with an exit opportunity, albeit one that required the company to take a haircut on its $183.4 million original investment.

So what now for Foodstuffs and its stake in the Red Sheds owner?

Stock Takes can only speculate, as the New World and Pak'nSave operator isn't commenting.

David Norman and Anne Norman. Photo / Sarah Ivey

Foodstuffs is unlikely to have any interest in a Warehouse takeover, having ruled out such a move in the past.

Besides, that would require the consent of the Normans, as well as founder Sir Stephen Tindall, who controls roughly 50 per cent of the retailer through various holdings.

The supermarket firm could potentially offload its shares to the Normans, if they're keen to lift their stake beyond the 16.4 per cent they now hold.

That would require the Rich List couple to launch a takeover bid or gain approval from Warehouse shareholders, as Foodstuffs' stock would take them over the 20 per cent threshhold. Their company indicated this week that it did not intend to make a takeover.

And Rickey Ward, NZ equity manager at JBWere, said Tindall didn't appear to have any need to sell up.

"[The Warehouse] generates significant sums of cash for him every year."

It's not completely implausible to imagine founder Tindall and the Normans teaming up to take the firm private.

Meanwhile, maybe Foodstuffs will simply bide its time and hope the stock makes gains on the back of the retailer's turnaround strategy. At current share prices, the supermarket operator would have to accept a big loss on the $151 million it spent on the investment in 2006.

Warehouse shares, which traded as high as $6.65 in early 2007, closed up 8c at $2.90 last night.