KEY POINTS:
Woolworths will seek a High Court judgment to overturn last Friday's Commerce Commission decision refusing it clearance to buy The Warehouse.
The appeal sent a strong message to shareholders that Woolworths has not given up on its takeover ambitions. The grocery giant surprised some by lodging a notice before the commission had explained its reasons why the application was declined.
A source close to Woolworths said the company felt it was being deliberately kept on the sidelines while another proposal for The Warehouse was being given "an armchair ride".
The market is now anticipating that Stephen Tindall or Pacific Equity Partners will make a renewed bid to buy the Red Sheds.
Woolworths said in a statement yesterday: "This significant commercial matter needs to be resolved promptly for the benefit of both Woolworths shareholders and The Warehouse shareholders, employees, customers and suppliers.
"Woolworths does not believe that an acquisition of The Warehouse by Woolworths would see the removal of an effective competitor from, or result in a substantial lessening of competition in, any relevant market."
The commission may be weeks or even months away from explaining why it turned down applications - from both Woolworths Australia and Foodstuffs New Zealand.
The regulatory body did not comment yesterday.
The Warehouse share price - which topped $7.30 in April on expectation of rival bids - has slumped since last week's decision. It closed yesterday up 1c to $5.98.
The source close to The Warehouse said the appeal was aimed at hurrying along procedures that will not be heard in court before the end of the year.
But the appeal may also help to flush out any bid by Warehouse founder Stephen Tindall, Pacific Equity Partners or both.
Macquarie Equities investment director Arthur Lim said: "The most logical thing now is for Stephen Tindall to renew the privatisation bid, but before they do, Woolworths are saying to shareholders 'hang on guys, we are still in the picture'."
Lim said that once Tindall, PEP or both made their position clear it was "almost inevitable" Woolworths would seek to increase its stake from 10 per cent to 19.9 per cent, the threshold it cannot pass without Commerce Commission approval.
"Going to just under 20 per cent would queer the pitch for Tindall, PEP and maybe Foodstuffs if it takes a minority share."
Yesterday Foodstuffs chief executive Tony Carter said the company was considering its position and there was still plenty of time before the 20-day period was up for it to appeal.
However, the co-operative is thought unlikely to lock itself into a court action when it would be happy to take a small stake as part of a PEP bid that would not require approval.
The key now is Tindall - the founder of The Warehouse who controls 51 per cent of its shares.
Is he a seller who would like to see the share price rise?
Or is he a buyer who would like to have it subdued?
Watchdog bites
* The Commerce Commission last week denied clearance for Woolworths and Foodstuffs to increase stakes in The Warehouse from their current 10 per cent to 100 per cent.
* The Commission has not yet explained its reasons, but yesterday Woolworths lodged an appeal with the High Court anyway.
* The High Court is unlikely to hear the appeal before Christmas.
