Foodland takeover game develops

THE fight for control of Foodland entered a new phase this week with reports the company was talking with interested parties to rival grocery wholesaler Metcash Trading’s aggressive bid for the locally based supermarket chain. According to reports, FAL managing director Trevor Coates said his board was in talks with at least two other potential suitors. This has some observers speculating on a Coles Myer or Woolworths offer for the New Zealand business. As previously reported by WA Business News, if successful in its takeover attempt, Metcash has plans to close down the Perth offices of FAL and sell the group’s 81 Action supermarkets across Australia to independent retailers. News of the talks came after Foodland’s half-year profit to February 1 slumped 32 per cent to $53.2 million. However, FAL’s board maintains that after adjusting for non-recurring items, profit has increased by 5.6 per cent, declaring a 43 cent dividend payable on April 22. News of the result pleased the market however, pushing the stock 26 cents higher to $25.06, although still short of the 12-month high of $25.20. Analysts hold the view that the independent analysis conducted by Grant Samuel and Associates looks shaky considering the poor half-year performance. That analysis values the company at between $24.86 and $27.33 per share. In contrast to this, the one month volume-weighted average price puts FAL’s value at $2.8 billion, while Metcash has offered $846 million in an arrangement that plans to separate the Zealand and Australian operations. According to local independent retailers, the proposed sale of the Action stores would present a significant challenge in terms of leasing arrangements that would have to be negotiated with major shopping centres and susceptibility to aggressive competition from rivals Coles and Woolworths. Meanwhile, Metcash has gained shareholder approval for the buy-out of its South African parent, 52 per cent shareholder, Metoz. The Metcash share price has also risen on the back of a $270 million share placement it recently completed.