Woolworths supermarket consolidation an indicator of a move on The Warehouse?

Just to get my mind off problems related to our 3 week old baby girl stranded in Bangkok I thought I would have a go at discussing The Warehouse Group [WHS.NZ] and its possible connection to the strong rumour over the weekend that Progressive, owner and operator of Foodtown, Countdown and Woolworths supermarkets is going to consolidate their 3 brands into their "low-cost" brand Countdown.

Apart from the fact that I don't think it is a clever idea to ditch two great brands I think this process could be significant in the ongoing battle between Foodstuffs and Woolworths Ltd [WOW.AU] - owner of progressive - for control over the Warehouse.

I will tell you why I think this.

In trying to make things less confusing for consumers, by consolidating brands and possibly saving money on admin and other business costs, Woolworth's Oz could be ready to make their play for the red sheds.

With one supermarket brand instead of three, that leaves room for another brand, like a general merchant such as the Warehouse to fill the brand void.

It is a little bit of a leap in thought I know but it makes alot of sense from a brand and business point of view.

There have been some interesting moves by Wesfarmers Ltd [WES.ASX] in OZ lately - Woolworths Oz main competitor - they are the owner of Coles supermarkets and other brands and they are consolidating their food offers to the cheaper end of town as well.

This consolidation towards the bargain end of retailing is a global phenomenon currently, as businesses react to the economic downturn. As The Warehouse is the largest non grocery retailer in New Zealand and consistently its cheapest, as such it would be a perfect fit for Woolworth's Oz bargain priced Countdown food brand.

There are also a number of Westfield Holdings Ltd [WSF.ASX] mall sites in the country with both a Foodtown and a Countdown and presumably there would be a space left empty in some towns for a different store to take its place.

Two distinct brands covering a massive product reach under one company.

Makes sense to me.

Please keep in mind I am a WHS shareholder.

The Warehouse Group @ Share Investor

Stock of the Week: The Warehouse Group
Warehouse 2009 interim profit a key economic indicator
When will The Warehouse bidders make their move?
Long vs Short: The Warehouse Group
Warehouse bidders ready to lay money down
The Warehouse set to cut lose "extra" impediment
The Warehouse sale could hinge on "Extra" decision
The case for The Warehouse without a buyer
Foodstuffs take their foot off the gas
Woolworths seek leave to appeal to Supreme Court
Warehouse appeal decision imminent
Warehouse decision a loser for all
Warehouse Court of appeal decision in Commerce Commission's favour
MARKETWATCH: The Warehouse
The Warehouse takeover saga continues
Why did you buy that stock? [The Warehouse]
History of Warehouse takeover players suggest a long winding road
Court of Appeal delays Warehouse bid
The Warehouse set for turbulent 2008
The Warehouse Court of Appeal case lay in "Extras" hands
WHS Court of Appeal case could be dismissed next week
Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

Share Investor Forum - Discuss this topic

Related Amazon Reading




c Share Investor 2009

When will The Warehouse bidders make their move?

The length of time that has passed between The Warehouse Group [WHS.NZ] deciding to drop their "Extra" format stores-the impediment that the Commerce Commission most recently successfully argued in the Court of Appeal was the reason the company couldn't be sold to its two current suitors-doesn't look encouraging for any positive outcome anytime soon.

Just when are they going to make a move?

In January, The Australian reported that both The Warehouse' suitors were "still considering" a purchase of the company .

There are a few reasons why Foodstuffs and Woolworths Australia [WOW.ASX] The Warehouse' two suitors, might be delaying or reconsidering a move.

1. the current uncertain economic climate might make a bid less attractive. I would argue that any bidder might be able to turn this to their advantage though by being able to bid lower.

2. capital maybe harder to obtain in order to make a bid.

3. both suitors could be waiting for a decision in the Supreme Court where Woolworths has sought leave to apply to have the Appeal Court decision quashed

4. Waiting for a response from the Commerce Commission to The Warehouse decision to dump their "extra" format stores.

5. A new proposal from founder and majority shareholder Stephen Tindall to take the business private.

The biggest impediment to a quicker sale process is The Commerce Commission's Paula Rebstock and her failure to make a ruling post the Warehouse ditching their Extra format stores in October 2008.

The Extra format stores were the main impediment, from the Commission's point of view, for denying the sale of The Warehouse and now that they have gone a positive announcement in The Warehouse favour on this matter would let the bidding process begin.


Disclosure: I own WHS shares


The Warehouse Group @ Share Investor

Long vs Short: The Warehouse Group
Warehouse bidders ready to lay money down
The Warehouse set to cut lose "extra" impediment
The Warehouse sale could hinge on "Extra" decision
The case for The Warehouse without a buyer
Foodstuffs take their foot off the gas
Woolworths seek leave to appeal to Supreme Court
Warehouse appeal decision imminent
Warehouse decision a loser for all
Warehouse Court of appeal decision in Commerce Commission's favour
MARKETWATCH: The Warehouse
The Warehouse takeover saga continues
Why did you buy that stock? [The Warehouse]
History of Warehouse takeover players suggest a long winding road
Court of Appeal delays Warehouse bid
The Warehouse set for turbulent 2008
The Warehouse Court of Appeal case lay in "Extras" hands
WHS Court of Appeal case could be dismissed next week
Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

Share Investor Forum-Discuss this topic


Related Links

The Warehouse Financial Data

• Summary
• Charts
• Dividends
• News
• Announcements
• Price History
• Related Securities

Related Amazon reading




The Wal-Mart Effect: How the World's Most Powerful Company Really Works--and How It's Transforming the American Economy by Charles Fishman
Buy new: $10.20 / Used from: $8.50
Usually ships in 24 hours


c Share Investor 2009

Warehouse bidders ready to lay money down

If you were reading the Share Investor Blog last Sunday you would have read my latest opinion over the long running The Warehouse [WHS.NZ] takeover saga.

I basically pointed out the news that came out today that The Warehouse have finally officially kicked their "Extra" format grocery stores into touch.

Personally I don't think The Warehouse gave the Extra format enough time and scale to succeed, at 3 years and 3 stores, though at least the cost of withdrawal will not be too cumbersome for the company and shareholders.

The focus now lay on what the two predators Foodstuffs and Woolworths Australia [WOW.ASX] will now do.

Late night meetings in both camps will be par for the course and we may see a bid next week subject to advice from legal counsel for the two companies and lawyers from the Commerce Commission.


Disclosure: I own WHS shares

The Warehouse @ Share Investor

The Warehouse set to cut lose "extra" impediment
The Warehouse sale could hinge on "Extra" decision
The case for The Warehouse without a buyer
Foodstuffs take their foot off the gas
Woolworths seek leave to appeal to Supreme Court
Warehouse appeal decision imminent
Warehouse decision a loser for all
Warehouse Court of appeal decision in Commerce Commission's favour
MARKETWATCH: The Warehouse
The Warehouse takeover saga continues
Why did you buy that stock? [The Warehouse]
History of Warehouse takeover players suggest a long winding road
Court of Appeal delays Warehouse bid
The Warehouse set for turbulent 2008
The Warehouse Court of Appeal case lay in "Extras" hands
WHS Court of Appeal case could be dismissed next week
Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

Related Links

Warehouse results




Audited Results for the financial year ended 27 July 2008.pdf (1MB)
Warehouse Corporate profile
2008 Interim Report
Shareinvestorforum.com -Discuss this company


Related Amazon reading



Joining Forces: Creating and Managing Successful Mergers and Aquisitions by Joseph E. McCann
Buy used from: $12.00


c Share Investor 2008

History of Warehouse takeover players indicates a long winding road

With The Warehouse Group [WHS.NZX] shares taking a dive over the last week or so because of their weak sales data and grim outlook in the medium term, the attractiveness to speculators wanting to get an even better slice of the company and flog it off to Woolworths Australia [WOW:ASX]-I don't think Foodstuffs are in the game because of their shallow pockets-is an opportunity going begging for.

Given that the Overseas Investment Office has already given its approval for Woolworths OZ to acquire the owner of the Red Sheds the only stumbling block for the big W will be for them to lose their defence of an appeal by the seriously malfeasant Commerce Commission(CC), who want to put the brakes on any possible deal to stitch up The Warehouse with Foodstuffs or Woolworths OZ.




The Warehouse Group @ Share Investor

Long vs Short: The Warehouse Group
Warehouse bidders ready to lay money down
The Warehouse set to cut lose "extra" impediment
The Warehouse sale could hinge on "Extra" decision
The case for The Warehouse without a buyer
Foodstuffs take their foot off the gas
Woolworths seek leave to appeal to Supreme Court
Warehouse appeal decision imminent
Warehouse decision a loser for all
Warehouse Court of appeal decision in Commerce Commission's favour
MARKETWATCH: The Warehouse
The Warehouse takeover saga continues
Why did you buy that stock? [The Warehouse]
History of Warehouse takeover players suggest a long winding road
Court of Appeal delays Warehouse bid
The Warehouse set for turbulent 2008
The Warehouse Court of Appeal case lay in "Extras" hands
WHS Court of Appeal case could be dismissed next week
Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

Share Investor Forum-Discuss this topic


Much of the Commission's case relies on the potential of The Warehouse Extra to provide competition to the current "duopoly", stunningly a duopoly that the Commerce Commission itself voted for when it initially allowed Progressive to merge Foodtown's brands with Woolworths NZ in 2002. Woolworths Australia then bought that merged entity in 2005.


Dr Farmer said the High Court at Wellington was wrong in fact when it concluded it was unlikely the Extra store concept would be expanded and even if it did succeed it was unlikely to exert competitive pressure.

"It would be ironic that the firm, which has the potential to expand and which is already exerting pressure on the incumbents, should be able to be the subject of acquisition by one or other of those incumbents, thereby subjecting consumers once again to the duopoly," Dr Farmer said.

James Farmer QC April 30 2008.


Ironic indeed Dr Farmer, have you read your client's former cases that initially advocated a duopoly in 2002?

The Warehouse itself has stated that the Extra format hasn't achieved the potential that they thought it would and it seems unlikely that they will expand the current 3 stores to the 15 planned ones.

Farmer then spent much time grasping at straws by arguing over what the term"likely"might mean.

There is fierce competition for market share in the supermarket sector though and if you look at the trail of litigation over the Progressive/NZ Woolworths merger of 2002, where an appeal was taken all the way to the Privy Council by Foodstuffs, lost, and then writs and a judicial review taken regarding the Overseas Investment Commission and their decision to allow the merger. The whole process began in May 2001 and was only rectified towards the end of 2002.

As I have indicated in earlier columns, even if the appeal to the High Court is lost by the CC, and I think they will lose-they lost their 2002 case after changing their initial positive stance to allow a merger, due to a small change in competition law- they can still put their tail between their legs and run off to the Supreme Court in Wellington and start yet another appeal. The history of these supermarket players and the Commerce Commission would indicate that the Supreme court is the most likely scenario. In which case any decision, either way, will be closer to the end of 2008.

The Warehouse shares were down 2.8% to NZ$5.20 or 15c on over 1 million shares traded today and any further weakness in share price is an opportunity for a good short to medium term play.


Related Reading

Warehouse takeover battle in court TVNZ
NZ retail duopoly court case begins The Australian
Woolworths still keen on NZ's Warehouse - report Reuters


Related Links

The Warehouse Financial Data

• Summary
• Charts
• Dividends
• News
• Announcements
• Price History
• Related Securities

Related Amazon reading




The Wal-Mart Effect: How the World's Most Powerful Company Really Works--and How It's Transforming the American Economy by Charles Fishman
Buy new: $10.20 / Used from: $8.50
Usually ships in 24 hours



c Share Investor 2008 & 2009

The Warehouse Group takeover saga continues

One to watch this week.

The Warehouse[WHS.NZX] takeover saga continues Tuesday 28 April (NZ Time) with the Court of Appeal case, and runs for a further 3 days. There will be no immediate decision, with weeks more to wait, well, we have waited nearly 2 years so far, and the likelihood that Foodstuffs and Woolworths Australia [WOW.ASX] will be able to make a bid looks more likely than not.

The Commerce Commission(CC), who are appealing against the affirmative decision in the High Court last year, have struck it lucky to some extent, with spiraling food prices making emotive headlines all over the place but it any judge worth his pay packet will look past this temporary wave of bio fuel inspired food inflation and make a fully emotionless decision.

The CC have a wafer thin case and any new arguments for their case will probably pin themselves on the possibility that The Warehouse and its "Extra" food format will be a serious player sometime in the distant future.

The Warehouse Group @ Share Investor

Long vs Short: The Warehouse Group
Warehouse bidders ready to lay money down
The Warehouse set to cut lose "extra" impediment
The Warehouse sale could hinge on "Extra" decision
The case for The Warehouse without a buyer
Foodstuffs take their foot off the gas
Woolworths seek leave to appeal to Supreme Court
Warehouse appeal decision imminent
Warehouse decision a loser for all
Warehouse Court of appeal decision in Commerce Commission's favour
MARKETWATCH: The Warehouse
The Warehouse takeover saga continues
Why did you buy that stock? [The Warehouse]
History of Warehouse takeover players suggest a long winding road
Court of Appeal delays Warehouse bid
The Warehouse set for turbulent 2008
The Warehouse Court of Appeal case lay in "Extras" hands
WHS Court of Appeal case could be dismissed next week
Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

Share Investor Forum-Discuss this topic


Unlikely given that The Warehouse itself has largely lost interest in the concept itself.

While many may groan when I mention government interference halting the other long running takeover saga, the Auckland Airport bid by the Canadians, this writer wouldn't put anything past New Zealand's socialist government putting their sticky mitts into this deal, should the Court of Appeal case come down in The Warehouse favour.

Whatever the machinations maybe in our courts this week, the outcome will be closely watched and a positive outcome for The Warehouse will be a serious shot in the arm for our local stockmarket, given its rather stagnant showing over the last 6 months.

Many shareholders will reinvest the collective north of NZ$ 2 billion proceeds of a sale in other shares on the NZX.

Keep watching here for further updates on this story.


Related Links

The Warehouse Financial Data

• Summary
• Charts
• Dividends
• News
• Announcements
• Price History
• Related Securities

Related Amazon reading




The Wal-Mart Effect: How the World's Most Powerful Company Really Works--and How It's Transforming the American Economy by Charles Fishman
Buy new: $10.20 / Used from: $8.50
Usually ships in 24 hours


c Share Investor 2008 & 2009

Warehouse Court of Appeal case could be dismissed next week

The Commerce Commission will need new evidence to
prove their claims of lessened competition in supermarkets
in the Court of Appeal.


Foodstuffs, the owner of the Pak 'n Save Supermarket chain, has just been given approval to open an outlet on Auckland's North Shore after 17 years of trying. Opposition to the company's plans were put up by Woolworths Australia [WOW.ASX] Foodstuffs opposition in New Zealand.

The battle by Foodstuffs to get this market up and running has been intense, sometimes underhanded and cruel. It has cost Foodstuffs and the North Shore millions of dollars in lost revenue and wages from the 300 hundred jobs that the supermarket will bring to the shore.

Woolworths as a foe has been a hard nut right to the end.

Foodstuffs and Woolworths are currently in a fight to win control of The Warehouse Group [WHS.NZ] and the High Court in November overturned a ruling by the Commerce Commission which prevented Woolworths and Foodstuffs bidding for The Warehouse.

The court will hold a hearing on Jan. 29 to decide whether the regulator is allowed to challenge the ruling in the Court of Appeal.

The obvious link to the two battles is clear.

None of these two retail chains are going to give up the fight for the Warehouse until all resources are exhausted.

The battle for control or to buy the Warehouse has been going for almost 2 years. There have been endless appeals by the two companies (as well as the Warehouse itself) and a denial by the Commerce Commission for a deal to go ahead. There will be more legal challenges if there is first a Court of Appeal case after the Jan 29 decision, and these will go as far as New Zealand's new Supreme Court, if the two appellants don't get their way and are not allowed to bid for The Warehouse.

In order for the Appeal Court to accept the Appeal by the Commerce Commission, they will have to furnish new information to the case to prove their point that if either of the two supermarket companies buy the Warehouse, competition or potential competition in the supermarket sector will be severely diminished.

This was the CC argument in the High Court and they lost on that point, so on that basis alone the Court of Appeal shouldn't hear the case.

If a case is to be heard with new evidence furnished, I cant figure out what that evidence could possibly be.

Given the preponderance of fact that seems to be on the side of the defendants, at this stage, I don't see the Court of Appeal giving approval for a hearing before their court on Jan 29.

Disclosure: I own WHS shares


The Warehouse Group @ Share Investor

Long vs Short: The Warehouse Group
Warehouse bidders ready to lay money down
The Warehouse set to cut lose "extra" impediment
The Warehouse sale could hinge on "Extra" decision
The case for The Warehouse without a buyer
Foodstuffs take their foot off the gas
Woolworths seek leave to appeal to Supreme Court
Warehouse appeal decision imminent
Warehouse decision a loser for all
Warehouse Court of appeal decision in Commerce Commission's favour
MARKETWATCH: The Warehouse
The Warehouse takeover saga continues
Why did you buy that stock? [The Warehouse]
History of Warehouse takeover players suggest a long winding road
Court of Appeal delays Warehouse bid
The Warehouse set for turbulent 2008
The Warehouse Court of Appeal case lay in "Extras" hands
WHS Court of Appeal case could be dismissed next week
Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

Share Investor Forum-Discuss this topic


Related Links

The Warehouse Financial Data

• Summary
• Charts
• Dividends
• News
• Announcements
• Price History
• Related Securities

Related Amazon reading




The Wal-Mart Effect: How the World's Most Powerful Company Really Works--and How It's Transforming the American Economy by Charles Fishman
Buy new: $10.20 / Used from: $8.50
Usually ships in 24 hours



c Share Investor 2008 & 2009

The Warehouse: Outcomes of Commerce Commision Decision

The Warehouse Group [WHS.NZ]watchers will know that the appeal case of Supermarket operators Foodstuffs and Woolworth's being allowed to bid for the company started yesterday in front of the Commerce Commission in the High Court at Wellington, after a decision barring either from taking over discount chain The Warehouse was brought down in June.

You will also know that the possible outcome of a Commerce Commission decision is probably going to be far from clear cut and is unlikely to provide investors or speculators with a clear focus on which to base any further investment.

My intention here is to outline what decisions the Commerce Commission possibly going make because it just isn't clear which way the cash register will open. It could go either way, with or without conditions but with the added confusion of The Warehouse itself being involved in the appeal.

What I would like to point out are the possible permutations that any decision by the Commerce Commission might have for the parties involved and investors in The Warehouse.

If the decision goes the way of both Foodstuffs and Woolworths Australia [WOW.ASX] being allowed to bid for the Warehouse then clearly this will be the best outcome for investors as there will be a fierce bidding war in which Woolworth's is likely to be the winner because its pockets are deeper than Warren Buffett, Bill Gates and that Mexican Billionaire who just made the top of the B club, combined.

Also with a open yes decision by the Commission it may leave the possibility of either Foodstuffs or Woollies partnering with Stephen Tindall to buy the company.

A no decision for both would of course lead to another appeal and would also leave the aisle open for Stephen Tindall, the majority owner of the Warehouse, to reignite his bid to launch a buyback of the company in conjunction with a private equity player or perhaps a new grocery entrant.

Woolworth's could be allowed to buy The Warehouse simply because its market share is significantly smaller than Foodstuffs.

Issues involved over domination of retail market segments should any of these decisions become reality may also rear its head. Selling of conflicting parts of any merged business that may cause competition issues may also be part of a Commerce Commission decision.

Whatever the outcome, the decision by the Commerce Commission is going to be a difficult one for them to make and is going to take a long time.

Since the sitting began on Tuesday 23 October the market has given the share price a boost by 20c to $5.65 today.


Disclosure: I own WHS shares


The Warehouse Group @ Share Investor

Long Term View: The Warehouse Group Ltd
Share Investor Short: Warehouse Group yield worth a look
The Warehouse Group: 2010 Interim Profit Review
The Warehouse: Big Brands, Big Opportunities
Warehouse strike opportunity to buy
Long Term Play: The Warehouse Group
Share Investor Short: Warehouse Group yield worth a second look
Woolworths supermarket consolidation an indicator of a move on the Warehouse?
Stock of the Week: The Warehouse Group
Warehouse 2009 interim profit a key economic indicator
When will The Warehouse bidders make their move?
Long vs Short: The Warehouse Group
Warehouse bidders ready to lay money down
The Warehouse set to cut lose "extra" impediment
The Warehouse sale could hinge on "Extra" decision
The case for The Warehouse without a buyer
Foodstuffs take their foot off the gas
Woolworths seek leave to appeal to Supreme Court
Warehouse appeal decision imminent
Warehouse decision a loser for all
Warehouse Court of appeal decision in Commerce Commission's favour
MARKETWATCH: The Warehouse
The Warehouse takeover saga continues
Why did you buy that stock? [The Warehouse]
History of Warehouse takeover players suggest a long winding road
Court of Appeal delays Warehouse bid
The Warehouse set for turbulent 2008
The Warehouse Court of Appeal case lay in "Extras" hands
WHS Court of Appeal case could be dismissed next week
Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

Discuss WHS @ Share Investor Forum - Register free

Download WHS Company Reports

Shop online at The Warehouse


From Fishpond.co.nz



Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @ Fishpond.co.nz





c Share Investor 2007 & 2009

Competitive Strain Inquiry

The decision that the Commerce Commission are currently mulling over, to give the go-ahead for the Warehouse to be sold to either Foodstuffs or Woolworths Australia, is a very clear one.

The competitive advantage that either one of these two companies would have if they were given approval and won a bidding war would allow a larger company to dominate not only the grocery sector but the variety goods sector as well.

The removal of a third and in time, eventually larger competitor in the Warehouse, will remove the ability of the public to have a viable chance for cheaper grocery prices and leave New Zealand with the current duopoly, with high prices and poor service.

To go back to two players in the New Zealand grocery business will be a missed opportunity that will probably never come again for generations and put the sector back where the variety goods sector was before the Warehouse came along 25 years ago.

Will the two players in this drama cite the sort of nonsense that Auckland Airport and Regency Duty trot out when they tell us less competition will mean more choice and cheaper prices for consumers? Well the answer is they already have. Those are two of their arguments for both of them buying the Red Sheds. How dumb does business and the Commerce Commission think the New Zealand consumer is. Clearly terminally so.

For too long New Zealand consumers have come off second best when it comes to the competitive advantage of having manifold players operating in an industry. When we get a chance to have more competition in an area so important and so uncompetitive as the grocery sector is, then we need to grab it with both hands and our watchdogs need to do their jobs and come out on our side for once.

Airlines, retail petrol, communication and a myriad of other industry have been given the once over lightly from the Commerce Commission when it comes to mergers, anti-competitive behaviour and the like.

If Woolworths and Foodstuffs want to expand in this country then they have only got to plunk down the some of billions that they have in revenues and go head to head with the Warehouse in a truly competitive environment and let the best man win. Carnage or not that is true competition.

We have only got to look at Woolworths anti-competitive modus operandi on the North Shore of Auckland where a new Foodstuffs Supermarket has sat empty for 2 years because WW has objected to it opening on the bizarre grounds that it will create too much traffic, strange when a Mitre 10 Mega has opened just around the corner. Do we expect Woolworths to operate fairly if they are allowed to expand by buying the Warehouse?

The alternative to a buy by the aforementioned parties would be for a party with a small presence already doing business here or a completely new player from offshore, thereby making a the purchase a competitive one that keeps three players in the grocery business.

New Zealand is a small market and often, in business sectors of monopolies, duopoly's and the like market dominance is all too frequent. While I'm not against business getting bigger, areas like the grocery sector that are extremely unrepresented by multiple players must be open to such when the opportunity arises. The Commerce Commission must therefore make the decision, and soon, to keep the grocery sector open to real competition.


C Share Investor 2007