Thursday, January 18, 2007

Woolworths seeking approval to buy The Warehouse Group

Woolworths Limited (ASX:WOW) has announced it is bidding to acquire The Warehouse Group in New Zealand. Formal approval to make an offer is being sought by Woolworths from the NZ Commerce Commission, which had already received a similar request from NZ-based Foodstuffs. At present, both own stakes of 10% each in the target, which has turnover per annum of $A1.7bn.

Majority owner Stephen Tindall is sitting on 50% after his plan to take the business private failed due to Woolworths' and Foodstuffs' investments. The rival bidders have each argued that the other should not be allowed to acquire The Warehouse Group on competition grounds. Interestingly Woolworths may just be doing this to stifle the Foodstuffs bid. I don't really see any reason other reason Woolworths would get involved now apart from trying to disrupt the FoodStuffs bid. Of course if one company gets approval then the other company will more than likely get automatic approval to make an offer. This could be good for shareholders in the company but I believe it will make Woolworths and/or Food stuffs pay a premium for the business. If this doesn't pan out I would expect the share price to decline and languish at a discounted rate for quite some time.

Good Luck Investing.

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