Warehouse opens itself to takeover

Shares in The Warehouse surged over 15 percent as investors speculated on the possibilities of a takeover from Woolworths or Foodstuffs after the iconic New Zealand retailer said it would end its "Extra" style supermarket format.

Warehouse shares, approximately half of which is owned by founder Stephen Tindall, or interests associated with him, were up 47c or 15.2 percent to $3.56 in mid-morning trading.

The stock exchange reported trading volumes of 405,194 in The Warehouse, well above the company's three month average trading volume of 336,278.

The company decided today to end its "Extra" supermarket-style format - a move that will open the company up to takeover from either Woolworths or Foodstuffs.

The Extra stores, of which there were three, were the reason why the Commerce Commission pushed for and got the supermarket giants blocked from taking over the Red Sheds.

The commission argued successfully in the Court of Appeal that left alone the Extra stores could provide increased competition in the supermarket sector.

But today The Warehouse said that after analysing the performance of the Extra stores it was decided not to continue and the Extra format would be phased out.

It is now to be expected that Foodstuffs and Woolworths will immediately look to launch rival takeover bids for The Warehouse.

They will now separately be looking to negotiate and strike deals with Warehouse founder Stephen Tindall, who controls 52 percent of the company.

Because of its size Woolworths has always been seen as the favourite but Foodstuffs, probably working with Australia's Pacific Equity Partners, should not be underestimated.

- © Fairfax NZ News