Foodstuffs has second go at Warehouse

Top supermarket chain Foodstuffs went to take another bite at discount retailer The Warehouse today, after its 10 per cent stand in the market went unfulfilled yesterday.

Foodstuffs snared 4.2 per cent of the Red Shed at $5 a share, and made another stand this morning.

Investors showed they were not convinced it would be the highest offer, sending the stock up to $5.13 before easing to $5.05 in early afternoon trading.

At its peak, the shares were at their highest level since July 2004.

Speculation has been rife over Foodstuff's strategy, with general consensus it is trying to block any global supermarket player from buying The Warehouse out.

Foodstuffs' managing director Tony Carter maintained last night that the investment was passive and that his company had no plans to increase its shareholding beyond 10 per cent.

The Warehouse itself entered the grocery market today at the Sylvia Park mega-mall in Auckland, but Mr Carter said he did not see it as a direct rival.

However, he did say there could be some synergies between the two companies.

"We've said it's a long-term strategic investment [that] stands on its own," he said.

"I have been asked whether there are options that The Warehouse and Foodstuffs could work more closely together and that's certainly something we would be open to discussing with The Warehouse."

Such talks would be mindful of competition regulations, he said.

The Warehouse founder Stephen Tindall and his family hold half the shares and have said they are not selling. The Warehouse had stated it believed the offer to be below fair value.

In addition to the threat of a Warehouse takeover, Foodstuffs -- which holds up to 57 per cent of the grocery market -- faces competition from its major New Zealand rival, Progressive.

Progressive, which holds 43 per cent of the market, bought Woolworths NZ in 2002, and was then taken over by Woolworths Australia.

Mr Carter said it too could become a takeover target by a global player, such as Coles Myer, Tesco or WalMart.

"That's the likely entry we see for them into the New Zealand market."

- NZPA