KEY POINTS:
Woolworths Australia chief executive Michael Luscombe says the retail giant would keep The Warehouse name if it bought the company.
Luscombe presented an application yesterday to the Commerce Commission for clearance to buy 100 per cent of The Warehouse Group.
"We just think it is a wonderful brand. It's an iconic brand in New Zealand. We would continue with that brand should we proceed with our proposal and be successful."
He stressed that the application was not a bid - or an indication that one was on the way.
But the application for clearance, matching one by rival retailer Foodstuffs, begins what will likely be a two-horse race for The Warehouse.
Analysts yesterday expected the company would change hands as early as the first quarter of this year.
The big question is how high competition between the grocery giants will push the share price, which closed yesterday up 5c at $7.04 after reaching $7.20 during trading. Woolworths believes this is about $2 above the share's fundamental value.
Speaking after presenting the application, Luscombe said taking over the 48 Red Sheds would give Woolworths improved buying power for merchandise in Asia.
"We think that The Warehouse Group represents an opportunity for a practical and sustainable way of getting into general merchandise in New Zealand."
The sale of The Warehouse represents a one-off chance for Woolworths to buy a footprint of 48 stores in one go, say analysts.
In contrast, the company would face years of delays through planning hearings if it tried to develop its Big W merchandise stores on new sites.
Woolworths would also need to spend significant amounts establishing the Big W brand in New Zealand.
"It does not make it impossible [to establish a general merchandise presence in New Zealand] but it is a longer road and somewhat more problematic to look at greenfield areas or other acquisitions," Luscombe said.
He sought to play down the image of Woolworths as a big foreign buyer against the New Zealand-owned co-operative Foodstuffs. He said Foodstuffs was now a dominant player in the grocery market.
The Foodstuffs application for Commerce Commission clearance portrayed its interest in The Warehouse as a defensive move, saying a Woolworth's purchase would put it at a disadvantage.
Luscombe said Foodstuffs was concentrating on estimates it had a 56 per cent share of the supermarket sector compared with 44 per cent for Woolworths owned chains.
But he said Foodstuffs wholesale interests and the Four Square chain made its share closer to 68 per cent, with Woolworths making up the rest.
Luscombe confirmed that Woolworths had met Warehouse founder Stephen Tindall and chief executive Ian Morrice but said discussions had not covered ownership issues.
In July last year Foodstuffs took a 10 per cent share of The Warehouse, mostly through a $5-a-share offer.
Last September, Tindall revealed a plan to privatise The Warehouse based on a cash offer of $5.75 a share with Pacific Equity Partners (PEP).
That month Woolworths swooped to pick up 10 per cent of The Warehouse, mostly through an overnight raid, with a cash offer of $6.50 a share.
In October, Tindall officially withdrew his proposal.
The following month, rumours circulated that a major player in the international grocery business - possibly Tesco - had expressed interest in buying into The Warehouse. Luscombe scoffed at such speculation, saying he would "be very surprised" if Tesco was interested.
When Foodstuffs applied to the Commerce Commission to buy The Warehouse in December there was speculation that Tindall's privatisation partner PEP may be tied to Foodstuffs' takeover bid.
The company's chief executive, Tony Carter, declined to comment on any involvement with the private equity firm.
