Warehouse shares surge on Woolies interest

Shares in The Warehouse shot up 17c, or 5.4 per cent higher, to $3.32 this morning after Woolworths Australia chief executive Roger Corbett indicated New Zealand's largest retailer could be next on his takeover list.

Woolworths teamed up with wholesaler Metcash last week to acquire the NZ and Australian operations of Foodland and yesterday Mr Corbett hinted The Warehouse could be next on the menu.

He told the ABC's Inside Business yesterday that the Foodland stores, for which Woolies paid A$2.5 billlion ($2.70 billion) and includes 22 stores in Australia, will act as a beachhead in New Zealand to enter the general merchandise market.

"The Warehouse is a very successful business in New Zealand and one that has done well for a long time," Mr Corbett said.

"We have made some assessment of (The Warehouse) already.

"We will continue to assess that and we'll take advantage of whatever is the best way to achieve the objectives of moving into general merchandise."

Goldman Sachs JB Were institutional adviser Humphrey Sherratt said Mr Corbett's comments had spurred The Warehouse's shares higher. "Admittedly, it's gone up on light volume," he told NZPA.

The low turnover in the stock showed the market was somewhat dubious of the prospect Woolies would make or succeed in a play for The Warehouse, which remains majority controlled by founder Stephen Tindall.

"He is key to any substantial corporate action in the stock. Nothing can done in any meaningful way without him."

In any case, Mr Sherratt didn't expect Woolies would do much in the general merchandise sector for a while yet. "It would be a long lead time for Woolworths to come in here and establish their core businesses (supermarkets) before moving on."

- NZPA