Warehouse rival's share rise queried

Millers Retail, the Australian discount chain mooted as a potential tie-up with The Warehouse, has received a "please explain" notice after an 11.5 per cent run in its share price last week.

The Australian Stock Exchange (ASX) queried a rise in Millers' shares, which raced up nearly 12 per cent in two days last week from A77c (84c) to A88c.

The Warehouse revealed in June that it is looking to merge its troublesome Australian "Yellow Sheds" chain with Millers' and then sell off the joint operations.

The enlarged discount variety business would be more competitive against the dominant Australian players, Coles and Woolworths.

The Warehouse yesterday declined to comment, but the pair are rumoured to be close to announcing a formal merger proposal.

"We made a comment to the New Zealand Stock Exchange on June 27, and we have got no further comment to make," The Warehouse's investor relations spokesman Mark Fennell said.

Brokers see the likely sale as positive because The Warehouse's Australian operations have been a drain on cashflow and profits.

Millers also referred to its June statement in response to the ASX query. The retailer said it advised the market in June that it was conducting a group review, with an emphasis on the discount variety business.

Millers said that review included divestment opportunities but that no decision had been made.

"The company has no other explanation for the recent price changes in its securities," Millers stated.

The company is due to report its full-year result soon. That could be a fitting time for any merger announcement to be made.

- NZPA