KEY POINTS:
The Warehouse Group's share price rose steeply for a second day yesterday amid speculation of another swoop by Woolworths Australia.
As shares topped $7, the Australian grocery giant gave no confirmation it planned taking its stake above the 10 per cent it secured on September 27.
But with Australian media speculating another Woolworths offer is likely, shareholders held tight rather than sell for a healthy profit.
The share price yesterday closed at $7.05, up 24c on the $6.81 at close of trading on Thursday and up 55c on Wednesday's close.
The price had been hovering around $6.50 - the same price Woolworths paid for its stake - but dropped to $6.42 after the announcement by Warehouse founder Stephen Tindall on Monday that he was withdrawing his proposal to privatise the firm with a what is now viewed as anaemic offer of $5.75 a share.
In theory at least, Tindall controls the company with 51 per cent of shares including the 21.7 per cent of The Warehouse held by the Tindall Foundation.
With Woolworths and Foodstuffs each holding 10 per cent that leaves around 29 per cent of shares held by individuals or institutions - making it difficult for Tindall and impossible for Woolworths and Foodstuffs to gain full control of The Warehouse on their own.
Foodstuffs, which bought its shares in June for $5, was always an unlikely bidder because it is a co-operative.
But the escalation clause on its purchase means that were it to try to increase its shareholding it would have to top up the people it paid $5 for at the new price.
Amidst this week's hiatus chief executive Tony Carter said that the company saw synergies between Foodstuffs and The Warehouse. "But we are not going to undermine our trading position."
Grant Taylor of Citibank said its research estimated that Woolworths would be prepared to pay as much as $7.65 a share on the basis it would enjoy $120 million of synergy benefits.
"Then there are the things you cannot put a price on - such as how much much it cost Woolworths to build its own [retail] network." he said.
Planning laws meant that it would be impossible and that fact added to the potential value of The Warehouse.
