KEY POINTS:
The Warehouse Group has rekindled prospects of a bidding war by joining High Court appeals from Woolworths and Foodstuffs over the Commerce Commission's decision to prevent them buying the Red Sheds.
Warehouse chairman Keith Smith said the move was to assist the court in deciding the grocery groups' challenges.
Financial officer Luke Bunt says The Warehouse has no plans "at this stage" to take a proactive or adversarial approach in the appeal hearings.
Smith said The Warehouse board of directors wanted to "ensure the company was appropriately placed to provide such market and other relevant evidence as the High Court may require to determine the appeals".
The company had received legal advice that joining the appeals was the best way to meet its needs.
But yesterday shares in the company spiked to $6.40 on the news and ended the day up 14c at $6.25.
Sharebrokers said that Smith's statement was read by the market as making it more likely that the rival companies that own the supermarket duopoly would win their appeals, and that they could bid again, increasing prospects for shareholders picking up a premium on the share price.
Macquarie Equities New Zealand investment director Arthur Lim said the expectation was that the announcement made it more likely that The Warehouse was no longer a neutral party in the appeal process.
Yesterday, Smith insisted that The Warehouse was "part of the appeals but it was not appealing the decisions".
Its presence would allow the court to be clear about the position of the company during claims made in the hearings.
Smith declined to say whether the company had any issues with the Commerce Commission decision.
Both Woolworths and Foodstuffs sought approval in advance to buy up to 100 per cent of The Warehouse Group that includes 85 Red Sheds general goods outlets and 23 Warehouse Stationery Stores.
The takeover interest developed last year after The Warehouse founder and controlling shareholder, Stephen Tindall, made an abortive attempt to privatise the company. It had announced plans to open 15 Warehouse Extra grocery stores to compete with Woolworths and Foodstuffs.
The Commerce Commission ruled in June that they would not be able to buy, saying it would harm competition and prospects for a third party to challenge a duopoly in the supermarket sector.
Tony Dellow, a competition lawyer for Buddle Findlay who is not working with either party, warned against reading much into The Warehouse joining the appeal, saying it was to be expected given that it was at the centre of deliberations.
A retail analyst with sharebrokers Forsyth Barr, Guy Hallwright, agreed that the market yesterday took the view that the appeal had increased slightly the prospects for Woolworths and Foodstuffs winning appeals and overturning the Commerce Commission bans on their buying The Warehouse.
Buyers ready
* Buyers have been circling The Warehouse Group for the past year.
* Woolworths Australia and Foodstuffs New Zealand have each bought 10 per cent and are likely bidders for the remainder.
* The Commerce Commission decided either as new owners would be bad for consumers.
* The two supermarket giants have appealed to the High Court and hearings are set to begin in October.
* Yesterday The Warehouse announced it was "joining" the appeals from its two prospective buyers.
