KEY POINTS:
Supermarket chains Foodstuffs and Woolworths are considering their next moves after the Court of Appeal prevented them launching takeover bids for The Warehouse.
Foodstuffs managing director Tony Carter said his organisation would be using the statutory 20-working day period for leave to appeal to the Supreme Court to "digest" today's ruling before making any decisions.
"At this point in time we are not ruling anything in or anything out and will be talking to our advisers."
A spokesman for Australian-based Woolworths said the group would "review our options following this decision".
An analyst said he expected the supermarkets to ask for leave to appeal to the Supreme Court given how much they had invested in The Warehouse, although any future bid would not be at the $7 a share mooted originally.
"The prize is still very large, and the price you have to pay for that prize has come down," Tower Asset Management equities manager Paul Robertshawe said.
Investors were stung by the Appeal Court decision, with shares in The Warehouse dropping as much as 81c at one stage today, and by mid-afternoon they were down 59c, or 15.5 per cent, to $3.23.
Foodstuffs and Woolworths each have 10 per cent stakes in The Warehouse and last year successfully went to the High Court to overturn a Commerce Commission decision to block any potential takeover.
Today the Court of Appeal allowed the commission's appeal against that High Court decision.
The commission welcomed the Appeal Court ruling as a "victory for supermarket consumers and competition in markets".
The commission said its case had focused on its concerns about competition in the supermarket sector where there was, in effect, a duopoly, except in the three regions where The Warehouse operated super centres.
Commission chairwoman Paula Rebstock said consumers knew more competition was needed in the supermarket sector.
"The commission considered that the presence of an innovative third party - such as The Warehouse - had the potential to increase the level of competition in this important market."
Forsyth Barr analyst Guy Hallwright said that he had thought the Appeal Court's decision would be an "each-way call", and was not surprised by today's outcome.
"If the decision had not gone this way then firstly it would have basically made the Commerce Commission into a toothless body," he said.
Most people would have thought that any ruling made by the commission could be taken to court where it would be overturned. That would have put parties in a strong bargaining position with the commission.
"Secondly it (a decision in favour of Woolworths and Foodstuffs) would open the way for duopolists in any area of business to overtake new entrants in the early days on the grounds that competition is not substantially diminished because there's not much competition there yet.
"So, you would basically entrench duopolies," Hallwright said.
The Appeal Court hearing was held three months ago, when the company's share price topped $6.
- NZPA
