If Warehouse shareholders are bracing themselves for this week's Commerce Commission ruling on a potential $2 billion takeover, their anxiety will be nothing compared to the nerves at Woolworths and Foodstuffs.
The commission has extended its deadline twice, shattering any confidence that either supermarket group would be cleared to buy the Red Sheds. As the tension mounts, speculation over the outcome has grown more feverish.
"If the commission says yes to both there's not going to be a competition," said one market source. "Foodstuffs is not going to buy the company. They're not in a position to bid for it.
"It'll take $6.50 a share, maybe $7 to get (founder Stephen Tindall) out and private equity won't get up to those levels. There will be no tension in the process to get it higher."
Under this scenario, he said, Foodstuffs, owner of New World and Pak'nSave, saw the regulator as a potential ally in beating Woolworths to a deal. "Foodstuffs went to the commission for full approval to force the issue and run the bet that Woolworths might be turned down.
"If it was turned down the private equity deal is back on the table -Foodstuffs would come in for 20% and you'd see Stephen and (private equity firm) Pacific Equity Partners sharing the rest.". Another source described that scenario as "gobbledegook".
Commerce Commission approval was an unavoidable requirement for both potential buyers, he said.
"I think people totally underestimated the issues. Even a non-grocery Warehouse store has a whole heap of products you can buy in a supermarket. People are only now starting to realise the risk of the Commerce Commission turning it down."
Warehouse shares have fallen significantly in the last month, down from $7.32 to $6.68 on Friday, reflecting less certainty of a competitive deal going ahead.
