The battle for control of discount retailer The Warehouse is expected to resume in earnest soon but no outcome is likely till the Commerce Commission has had its say.
Supermarket group Foodstuffs, which owns 10 per cent of The Warehouse, made an application to the commission just prior to Christmas to buy the company, though it said it was not committed to any course of action and was keeping its options open.
It is expected that Foodstuffs' rival Woolworths, which also has 10 per cent of The Warehouse, will make a similar application sooner rather than later.
The commission has given itself till February 28 to make a decision on the Foodstuffs application. Any application made by Woolworths could presumably be looked at in a similar timeframe.
Foodstuffs has about 57 per cent of New Zealand's supermarket trade and Woolworths the rest. Ownership of The Warehouse with its large, superbly located sites would give either of the supermarket competitors a huge boost in the battle against each other for market share.
The Warehouse founder Stephen Tindall holds the key to his company's future as he controls about 52 per cent of the stock. He has had discussions with both Foodstuffs and Woolworths and has conceded that he might end up selling his shareholding.
It is unlikely that Foodstuffs would look to bid for The Warehouse by itself. Foodstuff's unusual structure - it is three separate cooperatives - would make such a bid difficult to set up. The assumption in the marketplace is that it would set up a joint venture vehicle with Australian private equity operator Pacific Equity Partners.
PEP, which already has substantial business interests in New Zealand, was originally set to team up with Mr Tindall in a privatisation of The Warehouse. This was, however, torpedoed by the involvement of first Foodstuffs then Woolworths.
But with PEP already having conducted due diligence on The Warehouse and having arranged a funding package for a takeover, it could easily structure a deal with Foodstuffs to bid for the business. It is possible that such a bid, if it materialises, might also still include Mr Tindall as a shareholder.
If Mr Tindall retained a stake this might make a bid more palatable to shareholders - many of whom have followed the business for a long time and don't want to see it privatised.
Woolworths has said nothing publicly about its intentions toward The Warehouse, but is known to be interested in a full takeover. The Australian company has the size and muscle to fund a bid without needing any outside assistance. It is unlikely that Mr Tindall would retain a stake in The Warehouse under the terms of any Woolworths bid.
A key issue will be how much any of the players are prepared to pay for the company. The Warehouse shares doubled in price last year as a result of the takeover speculation.
However, the company's update to the market last Friday on its Christmas trading period painted a picture of a business still battling patchy trading. The Warehouse said its after-tax profit for the half-year to January 28 would be similar to the $59.1 million figure at the same time last year.
The shares fell 8 cents to $7 yesterday. Whether either Woolworths or Foodstuffs would want to pay much more than that to buy the company based on its current prospects is a key question.
However, neither Woolworths nor Foodstuffs is seen as wanting to yield the prize to their rival.
Mr Tindall indicated late last year he would like to see a resolution to the ownership of The Warehouse within six months. But there remains no certainty that a deal will be struck within that timeframe.
