Christopher Niesche: Which way will Australian raider jump?

All eyes are on Woolworths. Will the Australian supermarket giant sit tight on its 10 per cent holding in The Warehouse, or take the plunge and make a full takeover bid?

There is little doubt that Woolworths' overnight raid on The Warehouse share register was to protect the position of Progressive Enterprises, its New Zealand subsidiary which owns the Woolworths, Foodtown and Countdown supermarkets.

Stephen Tindall and Pacific Equity Partners' plan to take over and privatise The Warehouse and aggressively push groceries would have smashed the duopoly of Progressive and rival Foodstuffs.

Add to that the possibility that Tindall and PEP could have formed some sort of co-operative venture with Foodstuffs to secure Foodstuffs' 10 per cent stake in The Warehouse, and Tindall's takeover became a real threat for Progressive.

But there's also the possibility that Woolworths' move is expansionary as well and it will try to take over The Warehouse, or at least gain control.

It has previously signalled its ambitions for a general merchandise offering to complement its grocery business in New Zealand. Taking over The Warehouse would be the quickest and easiest way, and Tindall's takeover bid a couple of weeks ago may have forced Woolworths' hand.

At first glance, a takeover looks impossible. Tindall is commonly said to control 51 per cent of the company. He directly owns 27 per cent and his charitable Tindall Foundation owns 21 per cent, with other family members making up the balance to 51 per cent.

However, strictly speaking Tindall doesn't control the foundation. It has its own board and is required to make decisions in the best interests of the charities it supports, not of Tindall.

When he launched his bid for The Warehouse two weeks ago, Tindall stressed that the Tindall Foundation was independent of him. Should Woolworths offer, say, $6.50 a share, it will be a test of that independence.

The foundation could hardly knock back a higher bid then accept Tindall's own bid of $5.75 to $5.95 a share.

This puts The Warehouse in play, at least as a partial takeover target. With a 10 per cent stake already, securing a further 40 per cent - even without Tindall's 27 per cent stake and Foodstuffs' 10 per cent - shouldn't be too difficult if the price is right.

But a takeover attempt by Woolworths is far from certain.

So what would sitting on a 10 per cent stake achieve for Woolworths?

It wouldn't be enough to block the takeover by Tindall and PEP, which has been structured as an amalgamation or scheme of arrangement, meaning a stake of at least 25 per cent would be needed to be certain of blocking the scheme.

Perhaps Woolworths is trying to buy a seat at the bargaining table for Progressive, but there's been no indication yet from Tindall that he's prepared to deal with with either Foodstuffs or Progressive.

If Woolworths and Foodstuffs both refuse to sell to Tindall, in all likelihood they could block his takeover with their combined 20 per cent stake. They'd need only a further 5 per cent of shareholders to join them in refusing the offer to stop the takeover.

A stalemate is a strong possibility.