All-clear for Warehouse bidding war

Supermarket giants Woolworths and Foodstuffs have been cleared by the High Court to make takeover bids for The Warehouse.

The Warehouse's share price jumped 24 per cent, or $1.21, hitting $6.21 per share after the news was announced.

In a just-released decision, the court has overturned the Commerce Commission's June ruling blocking either of the supermarket companies from bidding for the Red Sheds owner.

A bidding war for The Warehouse can now be expected between Woolworths and Foodstuffs. Woolworths and Foodstuffs each own 10 per cent stakes in the company and both would separately like to take it over.

Warehouse shares rose 26 cents to $5.25 on the news.

However, there would appear a strong possibility that the Commerce Commission may now take the matter to the Court of Appeal.

Today's High Court ruling followed a nine-day hearing in Wellington, which ended just under four weeks ago.

The decision was reached swiftly. Many legal experts expected that no decision would be forthcoming till about February.

No reasons were given for the ruling today as much of the material is commercially sensitive.

It is expected that a public version of the detailed reasons will be forthcoming in a few days after approval from the lawyers representing the various parties in the case.

There would appear a strong possibility that the Commerce Commission may now take the matter to the Court of Appeal. It is not clear what impact that might have on any bidding war for The Warehouse.

The Warehouse's founder Stephen Tindall still holds all the cards through his nearly 52 per cent controlling interest in the company. However, he would be expected to sell his stake to either Woolworths or Foodstuffs if today's decision stands.

The commission turned down the supermarket companies' applications for takeover approval of The Warehouse in June. The key sticking point was that The Warehouse has recently moved into supermarket retailing through its new Warehouse Extra hypermarket concept.

The commission said New Zealand's supermarket retail market was already highly concentrated and a reduction of players from three to two would substantially reduce competition, to the detriment of New Zealand consumers.

In the appeal, heard by Justice Mallon and Australian academic Stephen King, both Foodstuffs and Woolworths attempted to demonstrate that the Warehouse's move into supermarket shopping would not work - and therefore there would be no problems with either of them taking it over.

The Warehouse is to hold its annual meeting of shareholders tomorrow.

With NZPA

- © Fairfax NZ News