The Warehouse standing on a solid foundation

Keith Smith

The Tindall Foundation - the charity founded by The Warehouse owner Stephen Tindall - will be key in determining who wins control of the Red Sheds.

That was highlighted yesterday with the news that Warehouse chairman Keith Smith and director John Avery resigned from the foundation when they learned of Stephen Tindall's plans to take over The Warehouse.

The charitable trust owns 21.7 per cent of The Warehouse Group, a stake that based on last night's share price of $6.50 would be worth $434 million.

That compares with $255 million on July 31 last year and is an increase of more than $250 million in 14 months.

But if the foundation wanted to sell, would it? And could it?

With its close relationship to Stephen Tindall - he established the trust in 1994 and the bulk of its revenue is from The Warehouse dividends - commentators usually add its 27 per cent to the 21 per cent held by him personally and another 3 per cent held by Tindall family interests.

Combined they are said to give him a controlling 51 per cent stake.

But on paper at least, the foundation is independent from Stephen Tindall and not obliged to be part of his proposal for a privatised Warehouse.

The schedule of board powers in the trust deed says that in any winding-up, reconstruction or amalgamation the board should act "in a manner which the board thinks will benefit the trust fund".

The question is whether Stephen Tindall's plan to privatise The Warehouse is good for the trust, especially when he says he is trying to take the company private because of the risks associated with his plans to expand The Warehouse into groceries.

Foundation spokesman Peter Menzies declined to comment on what the foundation would do if it received an offer for its Warehouse shares.

He said no proposal had been submitted to The Warehouse board from Stephen Tindall so its approach to the Tindall plan was not an issue.

A player in the Stephen Tindall camp said the foundation's interests had been tied to its relationship with him, because together the two parties had around 50 per cent of the company. This ability to deliver control is more valuable than if the two entities acted individually.

The question of the trust's status is under even more scrutiny this week after Woolworths' lightning raid to take 10.1 per cent of The Warehouse.

What would the trust do if Woolworths made a generous takeover offer, above what Tindall had been planning? And given Woolworths reputation for litigation how would it view the foundation's approach?

Tindall's own plans have already forced changes to the way that the foundation is run. Warehouse directors Smith and John Avery had been trustees of the foundation, with Stephen Tindall and wife Margaret.

But it was news to many in the business world when Smith confirmed yesterday that he and Avery stepped down "about two months ago" because Stephen Tindall advised them about his privatisation plans.

The Warehouse board will play a big role in considering the proposal, especially the terms of the buyback of shares at between $5.75 and $6.90.

Smith said there was an issue on his being on the foundation and he still considered himself an independent director at The Warehouse.

Smith and Avery were replaced as foundation trustees by independent director Peter Menzies and Jenny Casey. Margaret Tindall remains.