Reuters

The European Union's highest court struck down a German law that shielded Volkswagen from takeover, paving the way for Porsche to take majority control of Europe's biggest carmaker.  The ruling is a major boost for the European Commission in its crackdown on so-called golden shares, or strategic stakes that give governments special influence over listed companies.

"The Court confirmed that public authorities should not have special rights in private companies. Special rights have become an ever more endangered species on their way to extinction," Commission spokesman Oliver Drewes told a briefing in Brussels.

The law's demise could also end decades of cosy ties between management and labour at VW in a system called co-determination that gives workers a major say in how the company is run.

The court ruled as expected that the Volkswagen Law broke EU rules on the free flow of capital because it capped voting rights at 20 per cent and let VW's home state of Lower Saxony veto strategic decisions with just 20 per cent of the votes.

Porsche welcomed the ruling that lets the maker of 911 sports cars exercise all of its VW voting rights via its nearly 31 per cent stake in Volkswagen ordinary shares.  Porsche has said it has secured enough options to let it "significantly" raise its holding in VW but has declined to say whether this meant it could already gain majority control.  "There is no decision on how we will proceed. We will take the decision to the supervisory board and this will be a decision for the supervisory board," Porsche spokesman Frank Gaube said in Luxembourg.

The next meeting of the sports car maker's supervisory board is set for November 12, he said, adding he could not say whether the VW issue would be on the agenda.  One source familiar with the matter said it was unlikely Porsche would increase its stake before the end of this year. 

Analysts suspect it may await the outcome of Lower Saxony state elections on January 27 before making its next move.  This put an immediate dampener on shares of Volkswagen, which fell 3.3 per cent to 174.52 euros by 1224 GMT after briefly rising as much as 2.5 per cent following the court's decision.  Shares in Porsche were up 4.8 per cent.

VW said it would examine the ruling's impact on its statutes, while the powerful IG Metall engineering workers union called on the Berlin government to ensure labour representatives on VW's board could still block plant closures or transfers.  "The verdict puts the interests of capital markets above those of employees and Lower Saxony," IG Metall local chief Hartmut Meine said.

The 1960 VW law stipulated that Germany and Lower Saxony were each entitled to appoint two members to VW's supervisory board as long as they owned shares.  The German federal government is no longer a VW stockholder, but Lower Saxony is its second-biggest investor and said it intends to keep its VW stake of 20.1 per cent.

Porsche said it would be in favour of Lower Saxony's two board representatives remaining in their positions.  Both Berlin and Lower Saxony said they accepted the court's decision. The German justice ministry said it would immediately start the process of amending the legislation.  The EU executive is using the court to stop member states using strategic stakes in companies to thwart takeovers.

In June it gave Portugal a final warning to scrap special rights the country holds in two energy companies – Energias de Portugal and GALP Energia.  It also started legal action against Poland over a law giving the state special rights in 15 companies.  And it warned Romania over its share in the country's biggest oil and gas firm, Petrom, a unit of Austria's OMV.

New Zealand billionaire Graeme Hart has sold his shareholding in Goodman Fielder, the Australasian food giant he floated in 2005. The company said late last night that the near-20 per cent stake of New Zealand's richest man had fetched about A$562 million ($675.8 million).

Analysts said the sale would free up Hart to pursue acquisitions in the packaging sector, where he has been building assets, but was unlikely to put Goodman Fielder into play as a takeover target in the near future.

The sale of 265 million shares by Hart's Burns, Philp and Co through a subsidiary, BPC Finance (NZ), was made via a bookbuilding underwritten by Credit Suisse, Goodman Fielder said.  The company, whose brands include Mighty Soft, Meadow Fresh, ETA and Meadow Lea margarine, had its Australian shares placed on trading halt late on Thursday pending an announcement. Trading was also halted in New Zealand yesterday with a closing price of $2.70 a share.

CommSec analyst Grant Saligari noted that Goodman Fielder and other food and beverage firms faced tough conditions as Australia's worsening drought has pushed up wheat, dairy and oilseed prices. Goodman Fielder's shares last traded in Australia at A$2.23. They are little changed from the start of the year, but rose as high as A$2.80 in April. The broader market is up 18.5 per cent this year.

The Australian Financial Review said institutions had been asked to bid for Hart's stake at between A$2.12 a share and Thursday's close. Goodman's 2006/07 financial year net profit fell 38 per cent to A$239.8 million. It made a number of small acquisitions in the past year, including River Mill Bakeries in New Zealand.

Hart's sell-out of Goodman Fielder is the latest in a line of major deals by the one-time tow-truck driver. He bought and de-listed forest products giant Carter Holt Harvey last year for $3.3 billion and has since put its building supplies business up for sale, including 18 sawmill and manufacturing plants in NZ and Australia. The building supplies business sale is expected to fetch more than $2.3 billion. Macquarie Equities investment director Arthur Lim said the sale of assets did not necessarily mean Hart had another acquisition lined up.

However, he did have a track record of surprising the market. Hart has sold most of Carter Holt's forests for up to $2 billion, and the head office, various retail depots and packaging plants for more than $300 million. A successful sale of the timber products business would see Hart more than recover his outlay, with the strategic retention the firm's packaging division.

This year, Hart paid US$338 million for North Carolina-based Blue Ridge Paper Products and is merging it with Evergreen Packaging in Arkansas. Meanwhile, he has also completed a $3.2 billion acquisition of Swiss packaging group SIG.

Hart may be building a paper packaging empire but Lim would not be surprised to see him make an acquisition in another direction. "How about SkyCity? It wouldn't surprise me. It's a company that's been mismanaged. It's got core assets and it's got assets scattered about Australia and New Zealand that lends itself potentially to being sold." Hart's sell down would not trouble Goodman Fielder, Lim said. "Goodman Fielder has been its own company for quite a while now."

Selling out

• Graeme Hart has sold his Goodman Fielder holding.
• The sale of the 265 million shares was made via a bookbuilding underwritten by Credit Suisse.
• Hart is also selling Carter Holt Harvey's building supplies business for more than $2.3 billion.

Australia's second-largest retailer, Coles Group, agreed to a A$22 billion ($NZ24.5 billion) bid, including debt, from conglomerate Wesfarmers, in the country's biggest takeover.  The deal, if approved by shareholders, will end a protracted auction process since Coles first put itself up for sale in February after poor performance. Last year, it rejected two offers from private equity firm Kohlberg Kravis Roberts.

Wesfarmers, which owns Australia's largest hardware chain, Bunnings, will pay A$4 in cash and 0.2843 Wesfarmers shares for each Coles share, which it said valued each Coles share at A$17.25.  That represents a premium of 7 per cent to Friday's closing price for Coles.

"I'm surprised that Coles is able to extract A$17.25 given that it appeared that Wesfarmers were the only people at the table bidding for the assets," said Richard Herring, director at Burrell & Co. "Let's hope that Wesfarmers hasn't underestimated the task ahead of them," he said.

Wesfarmers, which snared 12.8 per cent of Coles in a share raid in April, said it expected to complete the deal in October.  Managing director of the Perth-based conglomerate, Richard Goyder, told a media briefing it planned to hold on to all the Coles units.

Wesfarmers had to bid solo for the troubled supermarket chain, after its private equity partners, Permira and Pacific Equity Partners(PEP) withdrew over the weekend.  The private equity firms were unable to make a deal stack up after a sudden jump in the cost of credit in US markets over the past week, a source familiar with the situation said.  Wesfarmers was left as the only bidder for the entire Coles group after a rival private equity bidding group led by TPG pulled out of the running last Thursday, also citing the rising cost of credit in the US.

Coles and Wesfarmers shares are suspended from trading and expected to resume today.  Wesfarmers was aided in its cash and scrip offer by the 21.4 per cent surge in its share price since late May, as its prospects for winning Coles kept improving. Wesfarmers shares closed on Friday at A$45.73, a record high.

The Wesfarmers' offer values Coles at 23 times forecast 2008 earnings, higher than its more successful competitor Woolworths at 21.3 times and UK's Tesco Plc at 17 times.  Coles said the offer has no conditions attached related to financing or competition regulator clearance.  It noted the takeover price was a 19 per cent premium over its price on February 22, before the sale process was announced.

Wesfarmers had originally planned to take a 50:50 stake in Coles' core supermarkets business with its private equity partners, and own 100 per cent of the general merchandise units, but is now bidding for the entire group on its own.  After rising to a record A$17.89 in May, Coles shares dived as members of the private equity consortium pulled out, and on Friday closed at A$16.12.

Coles has 2900 supermarkets, liquor stores, K-mart and Target stores, and office supplies stores Officeworks.

A source close to the situation said earlier today that PEP was still in talks with Wesfarmers about a management role, which is seen as critical by analysts to help turn around Coles' troubled core supermarkets business.  Steven Cain, a former executive at Coles and UK supermarket chain Asda, is a director at PEP and has been touted as having the experience necessary to help Coles catch up with larger rival Woolworths Ltd.

Without equity partners, however, Wesfarmers is likely to take on a larger amount of debt and may make a rights issue to fund the takeover, which will double the size of the company.  "It's a very big bite for Wesfarmers without its partners, no doubt about it. But if they can retain (retail executives) Steven Cain and Archie Norman to turn it around, it should all work out," said an analyst at an investment bank.  Norman, a Briton, is a former head of Asda, and has a consulting role with the Wesfarmers consortium.

The joint announcement appears to leave no room for rival Woolworths, which lodged its own bid for some of Coles' units at the weekend.

Coles had set a Saturday deadline for bids, four months after putting itself up for sale in February because of poor performance in its core food and liquor business.  Coles is being advised by Deutsche Bank and Carnegie Wylie, while Wesfarmers is being advised by Gresham Partners and Macquarie Bank.

Private equity firm Bain has pulled out of the consortium looking at buying Australia's Coles Group, a source familiar with the matter said.

Coles' advisers have been told Bain was withdrawing, the source said. The source said there was no official word about the position of Blackstone Group, which is also reported to be considering withdrawing from the group.

The size of the group had shrunk to four after Kohlberg Kravis Roberts and CVC pulled out earlier this week, boosting the chances of a rival bid by conglomerate Wesfarmers.

The remaining partners in the private equity consortium are Texas Pacific Group (TPG) and Carlyle Group.

You might want to think twice before making another personal call during work hours.

Companies can now buy a service that automatically analyses phone calls made by office staff, figures out which are for business and which are personal, and delivers a monthly list of repeat offenders directly to top management.

"If you're making a 30 second call every morning at about 9 a.m. and the number doesn't match those used by your colleagues then we can guess fairly accurately that's your spouse," said Robert Picton, product manager at South African IT firm Dimension Data.

Picton says that although other IT companies offer call analysis technology, Didata is the first to translate that information for managers, without requiring staff to use passwords - a system he says is open to abuse.

Didata says a company can cut its phone costs by 10-15 percent by using the 'Guardian' monthly service, not to mention hours of manpower saved through increased productivity.

Employees might bristle at the thought of managers monitoring calls. But Didata says the system focuses only on those who run up huge bills or spend hours of work time on personal calls, and says no one listens in to the calls themselves.

"Obviously it is acceptable to make a few calls home," said Picton. "But this is about the minority who are spending 12 hours a month on the phone for non-business purposes and running up bills of 800 rand ($NZ155).

SYDNEY - Takeover target Coles Group Ltd, Australia's second-largest retailer, will be sold in three separate lots in an auction designed to maximise sale price, The Australian Financial Review said today.

The retailer, which is being eyed by a consortium led by private equity giant Kohlberg Kravis Roberts , is expected to formally approve the A$20-billion-plus sale ($23 billion) process at a board meeting on Friday, the newspaper said in an unsourced report.

A Coles spokesman said only: "The sale process is underway," and that company policy was not to comment on press speculation.

Discount supermarket store Target is to be offered in one lot, stationery and business supplies group Officeworks as another, while the Coles supermarkets, liquor division and Kmart general merchandise outlets will be combined as the largest offering, the paper said.

This would avoid the prospect of a single private equity buyer snaring a "bulk discount" through a bid for the entire company, it said.

KKR, which now leads a consortium of six private-equity players considering bidding for Coles, has angered the retailer which wants to limit the size of bidding parties to four to increase competition in the sale process.

A source familiar with the situation told Reuters that KKR would still take a look at all three divisions if they were auctioned seperately.

The consortium includes Carlyle Group, CVC, Texas Pacific Group, Blackstone Group and Bain Capital.

Bidders will still be able to make offers for the entire company, but only via separate proposals of each of the three asset parcels, the newspaper said.

Coles expects to attract interest from domestic and international retailers. However, approaches to French retail giant Carrefour and Tesco in Britain were unsuccessful, one source said.

Woolworths has said in the past it is interested in Coles' A$1 billion Officeworks chain.

Coles rejected an A$18 billion buyout offer from a consortium led by KKR last year.

A clearer picture of Coles' sales troubles will be revealed on March 26, when the retailer is due to report first-half results.

The company could announce sale protocols at the same time, which would help deflect attention from what is expected to be a weak result in the core supermarkets business.

SAN FRANCISCO - The largest sexual discrimination lawsuit in US history moved forward against Wal-Mart on Tuesday when a federal appeals court approved class-action status for seven women who claim the retailer was biased in pay and promotions.

The plaintiffs estimate as many as 1.6 million women who have worked for Wal-Mart in its US stores since 1998 could join the lawsuit. The number makes the group the largest ever to sue for gender discrimination.

"We hold that the district court acted within its broad discretion in concluding that it would be better to handle this case as a class action instead of clogging the federal courts with innumerable individual suits," Judge Harry Pregerson wrote for the United States Court of Appeals for the Ninth Circuit.

"Although the size of this class action is large, mere size does not render the case unmanageable," he said.

Wal-Mart, the world's largest retailer, said it plans to seek a reversal in the decision. Its shares ended little changed on the news, closing at $48.58 on the New York Stock Exchange.

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The plaintiffs in the case allege they were denied promotion opportunities, with some also saying they were sexually harassed or subject to sexist remarks.

The 2-1 ruling by the three-judge panel took no position on those claims, stressing the decision only affirmed a lower court ruling to certify the case, Dukes v. Wal-Mart, as a class action against the world's largest retailer.

In a class action, individuals bring a suit on behalf of a larger group that suffered similar harm.

"Class actions have been for four decades now the critical ingredient in employment discrimination litigation," said William Gould, a Stanford University emeritus professor of law.

"There is very little incentive for the defendants to change their practices unless a finding is made that there is a nexus between the named plaintiffs and the group," he said.

Bentonville, Arkansas-based Wal-Mart has argued it did not discriminate and that class-action status should be dismissed because the company grants its 3,400 US stores a great deal of independence in their management.

In a dissent, 9th Circuit Court Judge Andrew Kleinfeld said the case should not be a class-action lawsuit.

"This case poses a considerable risk of enriching undeserving class members and counsel, but depriving thousands of women actually injured by sex discrimination of their just due," he wrote. "Plaintiffs' only evidence of sex discrimination is that around 2/3 of Wal-Mart employees are female, but only about 1/3 of its managers are female."

"Not everybody wants to be a Wal-Mart manager," Kleinfeld added. "Those women who want to be managers may find better opportunities elsewhere."

The decision by the San Francisco-based court will keep Wal-Mart on the defensive, said Brad Seligman, a lawyer for The Impact Fund, a nonprofit group in Berkeley, California representing the plaintiffs.

"Two courts now have ruled that Wal-Mart is going to have to face a jury," he said. "We fully expect Wal-Mart to keep appealing but we're very confident now that two courts have upheld this certification."

Donald Gher, chief investment officer of Coldstream Capital Management, which owns Wal-Mart stock, said the decision was a setback for the retailer and would cheer the company's critics in the US labor movement.

"Clearly this is a big win for the tort lawyers and for the unions who are looking to cases like this to help bolster their ranks," he said.

But Gher noted that the lawsuit is far from over. "This could drag on for a very long time," he said.

- REUTERS

WELLINGTON, Sept 14 (Reuters) - New Zealand homeware and sports retailer Briscoe Group Ltd. on Thursday reported a 21 percent rise in first half net profit on the back of increased sales.

The company said net profit for the six months to July 30 was NZ$12.01 million ($7.85 million) compared with NZ$9.93 million a year earlier.

Last month, Briscoe Group said its first half sales had risen 8 percent rise after better performances at its homeware and sports chains, with same store sales 3.2 percent ahead of the same time last year.

Gross margins rose to 41.28 percent from 40.05 percent a year earlier.

The company said the start of the second-half of the year had seen some slight softening in sales.

"While we are confident of further improvement to the bottom line, we don't expect the increase over last year for the second half to be as significant as that achieved for the first six months," Group Managing Director Rod Duke said in a statement.

The company competes with The Warehouse , KMart and the privately-owned Farmers department stores.

Shares in Briscoe, majority owned by managing director Rod Duke, last closed at NZ$1.60. So far this year they gained 29 percent compared with an 4.6 percent rise for the benchmark NZSX-50 <.NZ50>.

The company declared a dividend of 3.5 cents a share.