KEY POINTS:
The Commerce Commission has postponed its decision on the possible sale of The Warehouse for a fourth time, delaying the potential takeover battle investors have been hoping for.
"The decision-making process is too slow," said Brook Asset Management executive director Simon Botherway.
"It demonstrates that the Commerce Commission
has got too much on its plate, trying to do too much in too many areas, and I don't think it's great for New Zealand's investment reputation that they can't get a decision out the door in a reasonable period of time."
Woolworths Australia and Foodstuffs New Zealand have both applied to buy 100 per cent of The Warehouse. While neither party has declared its intentions, a decision giving advance approval for both parties could set off a bidding war that would further boost The Warehouse share price.
A "no" decision for one or both parties might see the possible sale bogged down in appeals.
The commission has been deliberating on the sale for five months.
Shares in the company dropped 9c to $6.46 yesterday. The company's shares have slipped from a high of $7.32 last month as investors have become less confident the commission will approve the purchases, potentially sparking a takeover war.
"From an investor's point of view, not having a decision is almost as bad as deciding against it," said ABN Amro Craigs broker Bryon Burke. "Clearly if there were no real issues involved they would have rubber-stamped it long ago."
Yesterday Foodstuffs chief executive Tony Carter confirmed financial sector speculation that the commission was looking into the potential effect of a sale on the general goods sector - dominated by The Warehouse - and not just supermarkets.
But while one analyst said it indicated the increased scope of the investigation, Carter said he believed the main focus was still on supermarkets.
James Craig, competition lawyer at Simpson Grierson, said the commission might be examining individual regional markets as it did when it allowed Woolworths to acquire Progressive in 2001, which would in part explain why the decision has taken five months.
"In the Progressive decision, they got down to regional retail supermarket markets of around 5km in zone," said Craig. "I'm not saying they'll have considered every 5km zone in New Zealand, but it gives you the idea if you're looking at it at that level it's more complex than looking at it on a national level."
Craig said the fact that the extension was only for two weeks rather than another month as with previous delays suggested that a ruling was imminent.
Tony Dellow, a competition partner at law firm Buddle Findlay, said "the commission works hard to get the decisions out as quickly as possible" when dealing with a merger application.
"The issues are difficult; and they've got to deal with people who have a vested interest in the outcome, both the applicant who wants the clearance and the other people that would have to compete with the merged entity that would often have incentives to put the worse light on it. All of that makes it hard going."
The commission decision will not decide who finally owns The Warehouse - that will be largely in the hands of founder Stephen Tindall, who controls over 51 per cent of the company - but it will decide the next stage of the sale process.
The commission has to decide whether letting Woolworths or Foodstuffs - the duopoly which controls the supermarket sector - buy The Warehouse would lessen competition.
The Warehouse has two Warehouse Extra grocery stores and is planning to set up 15, which would compete with Foodstuffs and Woolworths.
