Richard Inder: Tindall trustees' champagne goes flat

Who would want to be a trustee of the Tindall Foundation?

In the past it may have been fun. The trust was largely invested - mostly in The Warehouse - so one was not faced with many of those awfully complicated investment decisions.

Trustees basked in the halo The Warehouse founder Stephen Tindall earned when he made his great gift to the nation. Their mere position as guardians of one of New Zealand's largest charitable foundations implied a character beyond reproach.

They enjoyed access to the highest echelons of power, the Prime Minister, captains of industry and the cultural elite.

And their actions - doling out large sums to worthy causes such as supporting families, encouraging enterprise and helping those battling in the voluntary sector - were feted at every turn. They were players and any criticism could be dismissed as bad form or simply sour grapes.

How things have changed.

As Australia's Woolworths, Foodstuffs (each with 10 per cent of The Warehouse) and Tindall (with 27 per cent) square off for a three-way battle over the discount retailer, the trustees not linked to Tindall - ex-Mainzeal chief Peter Menzies and the largely anonymous solicitor Jenny Casey - will be questioning whether they really got a bargain.

Stephen Tindall is chairman, but has stepped aside while the future of The Warehouse is decided. His wife, Margaret, remains a trustee.

They will decide which of the three combatants gets to relieve the foundation of its 21 per cent stake in The Warehouse. It is a decision that puts the trustees in the unenviable position of deciding the future of New Zealand retailing.

There is a huge sum at stake. The Warehouse - at the price of Woolworths' $6.50 pre-emptive strike for 10 per cent this week - is worth almost $2 billion. Add to this a 20 per cent, $2 billion stake in New Zealand's $10 billion grocery market - potentially the sum at stake if Tindall succeeded in his ambition to challenge the duopoly that is Woolworths (through Progressive Enterprises) and Foodstuffs.

Then add the gains Woolworths can reap if it merges The Warehouse's general merchandising operations with its own. I don't have the exact number, but you can bet it is VERY BIG.

In short, this battle has the potential to get nasty. The trustees' every move will be scrutinised, not only by the media, but also by the armies of lawyers and public relations consultants standing at the ready.

The received wisdom until Tindall launched his plan to privatise The Warehouse last week was that he and the foundation operated as a unit. Indeed, that was the line put out by the Tindall camp as recently as this week.

But it is abundantly apparent this is not so.

The trust is bound by its deed to operate for the beneficiaries. In the present circumstances the interests of the trust, therefore, could diverge sharply from Stephen Tindall's.

The tension would become most apparent if Woolworths, or Foodstuffs for that matter, launched a knockout bid for the retailer that was not matched or bettered by Tindall. At $8 a share, for instance, many large investors would sell. And under the weight of wide acceptance, the trust would be hard pressed to hold out for more. The trust's stake, combined with two-thirds of minority shareholders, and the 10 per cent now held by Woolworths, is enough for control.

If the trust did this, the trustees potentially open themselves to allegations they breached trustees' duties and were acting in concert with Tindall in breach of the takeovers code.

Already the drums against the trustees are beating. Financial market players have raised the legitimate question of whether Margaret Tindall can maintain her seat at the trust given her longstanding and presumably co-operative relationship with the retailer's founder.

Menzies, who has taken on the mantle of foundation spokesman, says she is not involved with her husband's business activities and so can remain a trustee. Most married couples would regard the statement as illogical. Therefore there is good reason to believe the combatants will regard her as vulnerable.

At the very least, a lawyer's letter or a quiet word to a pliant journalist alleging a conflict could destabilise the trust, hampering its ability to make a good decision.

Tindall's titular role as chairman may be up for contest.

Others have legitimately questioned whether the trust was approached when Woolworths launched its pre-emptive strike. It was not. But what if it were? Its rejection (or less likely acceptance) could well have been challenged.

Separately the battle is casting Stephen Tindall and The Warehouse chairman Keith Smith in a less-than-flattering light.

Smith and fellow trustee John Avery quit the trust a couple of months ago because they knew Tindall was, in the words of Menzies, "considering doing something with regard to the ownership of the company".

This begs the question that if Tindall's musings were sufficient to precipitate their departure from the trust, perhaps minority shareholders also should have been informed.

A statement to the Stock Exchange from either The Warehouse (read Smith) or Tindall that the founder was reviewing his plans would have surely sparked a rush on The Warehouse shares.

Smith replies that the board could make no statement to the exchange because it did not have a formal proposal. But that explanation may not wash with minority shareholders, now told they should accept Tindall's bid because a "51 per cent premium over the three-month volume weighted average price" of The Warehouse shares before Foodstuffs bought its stake in June.

The next few months promise a battle royal.