KEY POINTS:
The Warehouse stores up and down the country will be in chocolate-coated chaos today as shoppers dive in for last-minute Easter egg bargains.
But the annual lolly scramble won't be a patch on the corporate scramble to play out in the coming months.
And in the wake of
this week's $22 billion mega-bid for Australian retailer Coles, the future for The Warehouse looks sweeter than ever. It also looks a little less certain that it will be resolved by a straight shootout between Woolworths and Foodstuffs.
What we do know now is that while we have waited for the Commerce Commission to decide on who is allowed to buy it, there has been a seismic shift in potential valuations for Australasian retailers.
The Coles offer - made by a consortium of Perth retailer Wesfarmers, Macquarie Bank, Pacific Equity Partners and Permira - is the largest bid ever made in Australasia. And latest news out of Australia (see C9) suggests a counter-bid led by private equity group Kohlberg Kravis Roberts is still on the cards.
Coles will sell on earnings multiples which, if applied to The Warehouse, would give it a share price well in excess of $8. That hasn't gone unnoticed. Shares in the The Warehouse, which had previously been drifting back, have risen 24c since the Coles bid was made on Tuesday. They closed at $6.99 on Thursday.
There are some investors who take a chess-like approach - second-guessing the moves of the big M&A players. What really gets these people excited is not the high price the Wesfarmers consortium has been prepared to offer, but the fact that one member of that consortium is Pacific Equity Partners (PEP).
It was PEP - in partnership with Stephen Tindall - that kicked off this whole turkey shoot back in September.
The $5.75 a share offer wasn't enough todo the job and Woolworths has since paid $6.50 for a 10 per cent stake, killing it completely.
The assumption at that point was that Tindall was resigned to selling out.
That's a dangerous assumption to make, because Stephen Tindall has surely never stopped considering his options as the largest shareholder.
If the dynamics of the Australasian retail sector change - then so do his options.
Tindall may yet find a way to stay in, partnering with Foodstuffs and PEP or even by making a fresh bid with PEP alone. We know that PEP has a working relationship with Tindall. And it has been tipped (although never confirmed) that PEP has talked to Foodstuffs about partnering with it on any future bid it may make.
There is the risk of course that Foodstuffs could get knocked back by the Commerce Commission, leaving Woolworths with a free shot at The Warehouse. It's hard to see Tindall or PEP liking that.
PEP is also clearly comfortable paying high multiples for Australasian retailers.
So what does all this circumstantial evidence tell us about the future of the red sheds?
It tells us that whoever it is that finally gets control of The Warehouse, they will not be getting a bargain.
Investors unfazed by market blip
Market corrections aren't what they used to be.
In fact - as the NZX hovers close to the record highs it set before the Shanghai wobbles of February 27 - it is hard to believe anything has been corrected at all.
A six-week hiatus is not long enough for the productivity of our major companies to do any serious catching up with their hefty market valuations.
And despite shedding about 3 per cent in value due to those two days of mild global panic, the NZX-50 is still up by a respectable 3.8 per cent for the year to date.
But with a slowing economy the local trading outlook - coupled with the currency situation for exporters - makes profit downgrades more likely than upgrades over the coming months.
Abstruse issues such as Chinese market regulation and US sub-prime mortgage lending have not been enough to deter investors.
This is a market where we read every day about another record price being paid or offered for assets in New York, Europe or just across the Tasman.
In this environment, New Zealand companies will continue to look like good value to international institutions and local retail investors who are already in the market will continue to benefit.
But at some point the gap between value and earnings will have to close. Unfortunately that means it may take a far bigger market correction to stop this bull run.
Liam Dann is Business Herald deputy editor. Christopher Niesche is away on leave.
