share price

Spotless Services NZ Ltd., the laundry, hospitality and cleaning contractor, offered to mop up the remaining shares in Taylors Group Ltd., allowing it to fully merge their operations.

Spotless Services, a subsidiary of ASX-listed Spotless Group Ltd., offered NZ$2.15 per share, made up of NZ$2.08 cash plus a fully-imputed dividend of 7 cents for the remaining 34 percent of Taylors. The offer amounts to a 7.5 percent premium on the current share price of NZ$2. The shares have surged 53 percent in the past six months. "An acquisition of the minorities in Taylors that we do not already own will enable us to manage Taylors in a more integrated and simplified manner," said chief executive Josef Farnik, in a statement. "We continue to be committed to the New Zealand market and intend to continue to grow the Taylors business."

The offer is subject to Spotless boosting its shareholding to 90 percent, which would force a compulsory takeover, and Overseas International Office approval. The bid also requires the share price to remain stable while the offer is open in which the NZX50 gross index must not decline more than 10 percent. Taylors' directors will obtain an independent adviser's report before making a recommendation to shareholders.

Spotless shares traded at A$2.46 on the ASX yesterday and have climbed 28 percent in the past three months.

-BUSINESSWIRE

Postie Plus Group's history as a listed company has been a sorry saga and I'm not holding my breath for anything much to change. That's despite the company promising to deliver a "modest" profit for the year ending July, providing the recession gets no worse.

The commentary around its latest results was mostly upbeat: a slightly smaller first-half loss, a 30% inventory reduction and a 32% debt reduction.

A closer look is far from reassuring. Yes, the bottom-line loss for the six months ended January narrowed to $2.7 million from $2.9m. However, the previous first half included the since-offloaded Arbuckles manchester chain's losses and the company's interest bill was down 31%. Stripping out these two items, the company's operating loss blew out to $3.1m, up 23.5%. Sales were down 5%, although the company was able to point to an improving trend: first-quarter sales were down 8.8%, but second- quarter sales were down only 2.3%. Inventory does seem to be under better control: it was $24.9m at January 31 compared with $35.3m a year earlier - it was up from $20.9m at July 31, but the company's second half is traditionally its strongest, so having more stock heading into it makes sense.

Ron Boskell, who was on holiday last week, has been chief executive since October 2005 and with the company since 2002, ahead of the September 2003 float. It isn't hard to argue he was handed a poisoned chalice. The company was a grab-bag of five retail chains thrown together in an unseemly hurry and floated when it was still an incoherent mess, and many of the strategies aimed at bringing it together simply didn't work.

And its warehousing and distribution system was based in Westport - a more inaccessible base would be difficult to find. It reflected the flagship Postie+ chain's origins as a Westport- based mail-order business.

The company was slow to move, shifting it all to Christchurch in bits and pieces. It finally bit the bullet in January last year and shifted the last bits, the hardly unimportant store replenishment functions, to Christchurch, a move which is saving it about $1m a year in logistics' costs.

Chairman Peter van Rij gave a strong indication then of what took the company so long. "If it was a question of the heart making the decision, we would not be moving.". Implementing adequate information systems took a couple of tries, but was finally achieved in April 2007. And it's now free of Arbuckles continuing losses and pared down to just two chains, the 79-store Postie+ and the 21-store BabyCity, and its Schooltex school uniforms business, which supplies more than 1500 schools.

Boskell has always acknowledged a key change needed to be better stock control. When he took over, the company was buying stock only twice a year and anything it didn't sell was put into storage to be recycled again the following year. The combination was nasty: customers were offered tired goods and the company incurred high storage costs. The aim now is to have fresh stock in all stores every six to eight weeks to give customers a reason to return.

But it seems to be taking Boskell rather a long time to get it right. In January 2006, just after he took over, inventory stood at $29.5m and it sank to $25.8m the following July. However, by July 2007, it had blown out to $37.2m and was still at $35.3m in January last year, well after the new information systems were up and running.

In March 2007, Boskell was talking about the company having a "clean stock position" but it clearly didn't. Van Rij told last November's annual shareholders meeting about the company's "crippling stock overhang from poor buying decisions in 2006".

Perhaps Boskell does have it right now. The results posted earlier this month assured shareholders "the group has entered the second half with a clean stock position for the crucial winter selling period" and that profit margins are lifting. Possibly shareholders are taking him at his word, for now. The share price hit a 20 cent nadir in February, but was trading at 32c last week. More likely it's Kathmandu founder Janet Cameron's continuing interest. Last year she bought all Arbuckles stock and took over 13 of the stores to turn into her Dogs Breakfast Trading Company stores and, earlier this month, she announced she had lifted her stake from 15% to 17.8%.

* Jenny Ruth is a freelance financial journalist and a columnist for The Independent.

For the third year in a row, retailing performance is likely to be low on the list of concerns among shareholders attending the annual meeting of The Warehouse in Auckland tomorrow.

The questions are likely to be the same as they were in late 2006. Is the company going to be taken over and when?

Stephen Tindall, who controls around 52 percent of The Warehouse, still holds the key to the future of the company he founded. As he is just a non-executive director of the company these days, it is unlikely he will be scheduled to speak to Friday's meeting. But it is probable that shareholders will put the pressure on (as they did last year and the year before) for him to get to his feet and say a few words. It's likely, however, that once again shareholders will get little meat on the carcass. Tindall will most probably reiterate that he will aim to do the best by the company and the shareholders.

Behind the scenes there will have unquestionably have been very recent further, separate, negotiations between Tindall and the supermarket giants Woolworths and Foodstuffs over a possible takeover. Both of the supermarket giants were blocked from making bids when the Commerce Commission successfully appealed against a High Court ruling that such bids could be made.

However, on October 9 The Warehouse blew that out of the water by deciding to stop the move it had made into supermarket retailing with its Warehouse Extra concept. While analysts have speculated that one or both of the supermarket companies will reapply for Commerce Commission approval, they are wrong. Neither party will, because neither party now believes it needs to.

The commission's argument had been that independent Extra could lead to increased competition in the supermarket sector. But Extra is now being wound down and the hurdle is gone. The Warehouse is well under way with plans for the three Extra stores to be converted simply into normal Red Shed general merchandising stores. The company has put the exit and restructuring costs at $10m to $12m before tax but says the move will lead to annualised pre-tax improvements in operating earnings of about $9m. With Extra out of the way both Woolworths and Foodstuffs are keen to strike a deal with Tindall. But price is the big snag.

Before the commission blocked any takeover Woolworths had indicated it was prepared to offer $7.15 a share for The Warehouse. The Australian company paid $6.50 a share for its 10 percent stake, compared with Foodstuff's entry price for its 10 percent holding of about $5 a share.

Doubtless both supermarket companies will now be arguing conditions have changed enormously since 2006 and therefore any acquisition of The Warehouse should be at a much lower price level. The Warehouse stock has been hovering under $4 recently.

From Tindall's perspective, however, there is little reason to rush. He does not have to sell and he will hold out for what he sees as the right price, still likely to be about $8. It appears unlikely any deal will be reached before Christmas and, indeed, Tindall will probably want to see how The Warehouse handles its most crucial trading period in what are truly awful times for retailers.

Shareholders are likely to get a brief update at the annual meeting on latest trading. However, this will probably not add much to the $322.4m first-quarter sales figures presented to the market on November 7.

Both on an overall and same-store basis, the figures were down 1.6 percent on the same time a year ago. Other major retailers such as Briscoe Group and Hallenstein Glasson have actually reported much bigger drops than this recently - Briscoe down 8 percent and Hallenstein Glasson nearly 7 percent lower. As a store that grew up in relatively tough times in the 1980s and 1990s, The Warehouse would rate its chances of holding, and perhaps even increasing, its market share during the downturn.

Relatively robust Christmas trading figures would provide Tindall further ammunition with which to drive up any takeover bids. The likelihood remains that a deal will be done, possibly more toward the middle of next year.

Woolworths and Foodstuffs would still be able to raise the cash despite the credit crunch. Woolworths may ultimately be the more desperate to bolster its position in New Zealand since anecdotally it is still losing supermarket share to Foodstuffs.

In 2006 pretty much all the shareholders present at The Warehouse's annual meeting believed that it would be the last one. Three meetings on nobody will want to be so bold as to definitely say this will be the last time - but it really might be.

Australia's OneSteel is planning to spend about $175 million to take over Wellington-based Steel & Tube Holdings.

OneSteel, which already owns 50.27 percent of Steel & Tube, is to offer $4 a share for the rest. This compares with a price of $3 on the market before the offer was announced this morning. The offer values the whole company at $353 million. The offer will be conditional on the Australian company achieving 90 percent acceptance. Also, and most unusually, the bid is conditional on the NZX 50 index not dropping below 2710 for three consecutive days prior to the bid being declared unconditional.

The NZX 50 is comfortably above that level at the moment - trading above 3200 early today. But the inclusion of such a condition demonstrates nervousness about the current global environment.

The bid comes at a time when Steel & Tube's profitability has taken a hit from the economic downturn. Its earnings slipped 19 percent to $22.5 million for the year to June.

The company said that its three Key market segments of construction, manufacturing and the rural sector, all suffered to a varying degree as the combination of exchange rate volatility, high interest rates and reduced growth in consumer spending slowed the economy. These conditions prevented businesses in general from recovering the increased cost of doing business resulting in a margin squeeze.

OneSteel managing director Geoff Plummer said the takeover would allow OneSteel to simplify its corporate structure and efficiently manage the Steel & Tube business as part of the OneSteel group.

"OneSteel's proposal confirms its commitment to the New Zealand market and to Steel & Tube’s business, employees, customers and suppliers. If OneSteel's offer proceeds, OneSteel intends to retain the Steel & Tube brand, grow the Steel & Tube business and maintain a quality product offering and high level of service."

Pumpkin Patch shares are continuing to surge in value after multimillionaire Kathmandu founder Jan Cameron disclosed a 6.3 per cent interest in the children's clothing retailer.

The shares are now up 12 cents, or 8.5 per cent, to $1.52 from the four-year low of $1.40 hit on Friday shortly before the reclusive Tasmanian resident Cameron disclosed her holding. Cameron is the second wealthy retail investor in a few months to disclose a holding in Pumpkin Patch. The majority shareholder in Briscoe Group, Rod Duke, has built a 10 per cent stake.

Pumpkin Patch chairman Greg Muir said today he was "comfortable" with the new investors. "It is two well placed New Zealand investors who obviously recognise that the company is undervalued at the moment." On Cameron, Muir said: "She's been building that [stake] over many months - we've known about that. We haven't had any dialogue with her at all. It is for her to discuss. We are quite comfortable. We've got no issues with it."

While the moves by both Cameron and Duke will lead to speculation that one or both may seek to assert influence on the future running of Pumpkin Patch, Muir said he believed both might be passive investors. Neither had sought a seat on the board at this stage. "They've certainly made no representations to us in that respect, but I can't answer what their intentions are."

The moves from both the investors come as Pumpkin Patch, a former sharemarket darling, has seen its share price pounded as investors worry about apparent speed wobbles the company is hitting in its US and British expansion. There is also concern about its stock levels, which have risen sharply this year and its debt levels, which may now be as high as $95 million from virtually nothing two years ago.

Cameron sold Kathmandu to private equity partners Goldman Sachs JBWere and Quadrant in 2006, reportedly for about $275 million. Subsequently she has built a 15 per cent stake in Postie Plus. She also recently bought the Arbuckle's stores from Postie Plus. In addition she has opened five homeware stores in New Zealand under the brand name Nood (New Objects of Desire).

Pumpkin Patch's shareholder register is now getting crowded. The biggest individual shareholder is still believed to be South African investor Setar Motani, with about 12 per cent - though this shareholding has reduced in the past few years. Another investor who has reduced his shares since the company floated in 2004 is managing director Maurice Prendergast, who currently owns about 6.2 per cent, down from 8 per cent a few years ago. Fisher Funds Management has recently sold down its stake to around 6 per cent as well.

Pumpkin Patch shares were listed in mid-2004 at $1.25 a share. They rose to as high as $4.95 on a wave of enthusiasm about the company's moves to become a global brand. However, in more recent times the expansion into the US and Britain has appeared to hit speed wobbles.

Market expectations had been for a profit this year of about $22 million to $23 million, down from $27.6 million. But it is likely analysts will further trim earnings forecasts after a recent Asian investor roadshow presentation by the company that talked about tough conditions in Britain and the US.

Freightways' first-quarter profitability was flat as the express delivery company continued to be shackled by the sluggish economy. Managing director Dean Bracewell told shareholders at the annual meeting in Auckland yesterday that operating earnings for the three months to September 30 were up by 4 per cent. But higher interest rate costs meant net profit was flat at $7.7 million, he said.

Mr Bracewell declined to comment on mounting takeover speculation. Freightways, which shares the New Zealand express package market with NZ Post in a near-duopoly, has long been touted as a likely takeover target. Suggestions that Toll Holdings might launch a bid have been around for a couple of years. This month, the Australian Financial Review reported that as well as Toll, Qantas, FedEx and Deutsche Post's DHL were interested.

"I have no doubt that it's on at least a couple of companies' radar screens," First NZ Capital analyst Andrew Mortimer said. "I certainly wouldn't discount it but it's a question of timing. It's got an open register and it's vulnerable."

Mr Bracewell said he saw no short-term let-up in the challenging New Zealand conditions. "We said at the full-year we expected a flat environment and that's what we've got," he said. "It will come back; it always does. And when it does we'll be ready with good-quality capacity and we'll reap the benefits of it then, but I couldn't put a time frame on that."

At close the Freightways share price was down 15 cents at $3.80.

Growth in the business mail and information management businesses continued to outpace the core express business, Mr Bracewell said. Capital investment of $15 million would be spent during the 2008 year including the initial development of a recently acquired information management site in Wellington.

Freightways' largest shareholder is Fisher Funds, which has a 9.8 per cent stake. Fisher Funds chief investment officer Warren Couillault said Freightways was doing well relative to the conditions it was operating in. "It does feel to me that the underlying barometer of the economy, in moving freight around the country, has been weak for about a year and a half," he said. "The fact that they're holding their bottom line is good, given that they've got huge cost increases in labour, occupancy and energy. "The little nibbling acquisitions they are making in data and storage are good as well. That will give them a springboard in Australia and it's exactly what we want them to be doing."

Directors Sue Sheldon and Sir William Birch were re-elected to the board at the meeting. Directors' fees were increased from $225,000 to $336,000. This includes $52,000 to be available if a sixth director, likely to be an Australian, is added to the board.

Woolworths has told The Warehouse Group it is prepared to pay $7.15 a share to gain control of the Red Sheds company, the Business Herald understands.  The approach - contained in a written proposal to the retailer's board - was made in April, two separate sources say.

The Commerce Commission is to rule this week on whether the Australian retailer will be allowed to take over The Warehouse.

The company's chairman, Keith Smith, denied the board had received an offer.  "We have not not received an offer and there is no bid," he said.  But asked if the board had received a written indication from Woolworths about what it was prepared to pay, Smith said "there is no offer", and refused to comment further.

A full takeover bid from Woolworths - which owns Progressive Enterprises supermarkets in New Zealand - is unlikely, as rival supermarket group Foodstuffs holds 10 per cent.  This would prevent Woolworths gaining full control.  An alternative is for Woolworths to make an offer under a scheme of arrangement, which would require approval from holders of only 75 per cent of Warehouse shares.

The Warehouse board is understood to have not yet responded to Woolworths' proposal.

The Warehouse share price yesterday tumbled 9c to $6.16 as the Commerce Commission decision neared.  The commission is deciding whether to grant clearance to Woolworths and Foodstuffs to seek up to 100 per cent of the company.

The decision has been delayed four times. It is due tomorrow, but may come today.  Each delay has increased speculation that the commission would not give either party clearance to buy the Red Sheds, and Warehouse shares have slid from a high of $7.32 in April.

Should approval be granted to both Woolworths and Foodstuffs, a bidding war is expected and the Warehouse share price would probably rocket.  The media has speculated that Woolworths could pay $8 or more.

News that it has made an approach to pay only $7.15 would probably lower expectations of a high bid and limit how far the share price would rise.  A $7.15 a share offer values The Warehouse at $2.2 billion.

Newstalk ZB breakfast host Paul Holmes started speculation that Woolworths had made a bid, saying yesterday morning on his breakfast show that he knew it had.  "If there is such a bid - and I believe there is - shouldn't the entire shareholding community know that there is?" he said. "Would shareholders have continued to desert the share if they knew there were an offer on the table?"

Like Foodstuffs, Woolworths owns about 10 per cent of The Warehouse.

Smith said yesterday the board had had discussions with "shareholders", but they had been general discussions with no talk of strategic issues or bids.  "There are two parties that we know and that the market knows are out there," he said. "I don't know their intention after the Commerce Commission comes through. It does not matter which party I speak to or any third party - they have continuous disclosure obligations that are no different to the ones we have."

Sources close to Warehouse founder Stephen Tindall's camp have said that Tindall has insisted Woolworths and Foodstuffs obtain advance clearance so that once any bids were made there was no potential for delays.

Tindall - whose interests control more than 51 per cent of the company - made an attempt to privatise The Warehouse late last year.  That $5.75 a share offer was blown out of the water by Woolworths, which paid $6.50 a share for its 10 per cent stake in the company.  Tindall is in Valencia for the Louis Vuitton Cup and could not be contacted.

Most sharemarket observers now seem convinced the Commerce Commission will say "no" to either Foodstuffs or Woolworths buying The Warehouse when the long-awaited decision is finally delivered - probably by Friday.  The market was giving its own verdict yesterday on the chances of success for either of the supermarket companies.

The Warehouse shares sagged to their lowest level since Woolworths bought its 10 per cent stake in the company on September 27 last year, matching the 10 per cent Foodstuffs had grabbed during June and July.

In April this year, The Warehouse had traded as high as $7.32 on expectations that the commission would clear the two supermarket firms to buy the company - opening up the prospect of a big bidding war.

But the price has drooped in recent weeks as this earlier optimism subsided.  Yesterday the shares fell a further 5c to $6.25.

Woolworths and Foodstuffs have been waiting nearly six months for the commission to decide, and the deadline for a ruling has been extended four times.

The Warehouse founder Stephen Tindall still holds all the aces.  He directly owns about 30 per cent of the shares and has strong links with the charitable Tindall Foundation, which owns 21.7 per cent.  Any would-be buyer would have to deal with Mr Tindall first.

He is currently in Valencia supporting New Zealand's efforts to win back the America's Cup, but it is believed that would be no object to his negotiating The Warehouse ownership situation should the commission give a "yes" decision.

But assuming the verdict is no, both Foodstuffs and Woolworths are expected to appeal against the decision.

Buddle Findlay competition partner Tony Dellow said yesterday that the time taken for an appeal would depend on availability of the courts.  "You could expect if (Woolworths and Foodstuffs) did file next week it would be some months before they could get a fixture.  "You are not looking at getting out of the whole thing in less than about six months."

Such delays are seen in the market as not good for The Warehouse and its staff, given that the company has now been surrounded in takeover speculation since Mr Tindall started making subsequently aborted efforts to privatise the company in the first half of last year.

The key focus of the commission's inquiries appears to have been The Warehouse's recent moves into fresh food shopping through its new Warehouse Extra format.  Currently there are just two of these stores: in Auckland and Whangarei, but a total of 15 are planned within five years.

If the commission does say "no" to Woolworths and Foodstuffs, it is likely to be because it believes that, left independent, The Warehouse can be a viable supermarket competitor.  But analysts are increasingly doubting whether The Warehouse really can be a viable competitor, and wonder if this would be a valid reason for the commission to turn down the two would-be buyers.

One analyst said yesterday that a recent market survey suggested that the Warehouse Extra in Auckland's Sylvia Park shopping complex had the highest average supermarket prices in the region - meaning it was struggling to compete.  The analyst said the signs were that the move into supermarket retailing was not going as well as The Warehouse had hoped.

A bidding war looms for Coles Group after a Kohlberg Kravis Roberts-led consortium told the retailer it may top a A$19.7 billion ($22.6 billion) bid by Wesfarmers, pushing Coles shares to a record high.

Coles, Australia's second-largest retailer, has already attracted the country's biggest takeover offer from Wesfarmers, a home improvement-to-energy conglomerate, at A$16.47 a share. Last year, Coles rejected a KKR-led offer of A$15.25 a share.

"It looks like it could turn into a bidding war. KKR have obviously done a lot of work on Coles," said Constellation Capital Management analyst Richard Norris, a Coles shareholder.

Coles chairman Rick Allert said yesterday that KKR was confident it could equal or beat the Wesfarmers bid price for Coles, which put itself up for sale in February. Coles shares rose 2.7 per cent to A$17.42, well above the Wesfarmers' offer, in an overall market up 1.1 per cent.

Constellation's Norris said Wesfarmers could "just as happily" take a profit on its Coles stake if KKR comes up with a higher offer.

Potential bidders will get a look at Coles' books this week, in a process that has been accelerated by Wesfarmers' surprise offer last week. 

KKR, with other private-equity firms Bain, CVC, Blackstone Group, Carlyle Group and TPG, will be looking for more detail on what Coles is worth.  Coles did not engage in detailed discussions last year with KKR, which made two failed bids.  Coles urged shareholders on Monday not to sell until the board had considered all alternative proposals.

Perth-based Wesfarmers has won the backing of privately-owned Hedley Group, taking its voting control in Coles to 12.8 per cent.

The Myer department store chain, which was sold by Coles last year, turned in an 80 per cent profit increase last month under new private equity owners, raising hopes for a turnaround at Coles, which has lost market share to larger rival Woolworths.

A spokesman for Wesfarmers said the company, which owns the Bunnings hardware chain, would take out advertisements in Australian newspapers this week to reach Coles' 350,000 shareholders, most of whom own less than 10,000 shares.

Kiwi Income Property Trust said today its property assets had been revalued up by $210 million to $1.9 billion for the year ended in March.

Chief executive of the trust's manager, Angus McNaughton, said the 13 per cent increase in the portfolio's value was equally spread between the retail and office portfolios.

The trust's flagship office asset, the Vero Centre in Auckland, had been valued up by $44m to $300m.

Unisys House in Wellington was revalued by $14m to $74m and the PricewaterhouseCoopers Centre in Christchurch by $13m to $58m.

A value of $420m had been put on the Sylvia Park shopping centre in Auckland, $43m above the projected valuation.  The final fourth stage of that retail project is due to open mid-year, which will also see the opening of the Sylvia Park railway station.

The trust's Centre Place Shopping Centre in Hamilton was revalued up by 22 per cent to $122m while the Northlands Shopping Centre in Christchurch was valued up $19m to $249m and the North City Shopping Centre in Porirua by $18m to $135m.

The trust is projecting a gross dividend of 9.50 cents per unit for the year to March 31, 4.4 per cent of the previous year's dividend.  Kiwi Income shares were up 1c to a record $1.69.