Woolworths takes $28.3m haircut on Warehouse as James Pascoe buys stake

Woolworths has taken a near $28.3 million haircut on its investment in Warehouse Group after James Pascoe, the retail group owned by David and Anne Norman, bought the Australian supermarket chain’s stake in New Zealand’s largest listed retailer.

James Pascoe paid $87.1 million to acquire Woolworths 30.55 million Warehouse shares at $2.85 a piece in an off-market sale, substantial shareholder notices lodged with NZX yesterday show. That’s some $96.4 million below the $183.4 million the Australian retailer paid for it’s stake in September 2006, via subsidiary Bancroft, which was amalgamated into General Distributors the following year. That’s been mitigated by the $68 million Woolworths pulled out in dividends since November 2006.

In a statement to the Australian stock exchange, Woolworths said its wholly-owned New Zealand subsidiary General Distributors, sold its 8.8 percent stake in Warehouse after it “determined that the investment in Warehouse is no longer required as part of its New Zealand strategy”. The Australian grocery chain took the stake before rival supermarket chain Foodstuffs took a 10 percent stake in March 2007, effectively creating a stalemate between the two competing  retailers over any takeover.

The latest purchase by James Pascoe has more than doubled the investor’s stake since it first emerged as a substantial shareholder with 6.3 percent in October last year.

James Pascoe, which owns Farmers, Whitcoulls, Pascoes, Stevens, Stewart Dawsons and Goldmark, said it does not intend to make a takeover bid for New Zealand’s largest listed retailer, but was investing in “another strong New Zealand brand that fits within our philosophy of supporting New Zealand retail.”

The company has been lifting its stake in Warehouse, as the shares traded at a near two-and-a-half year low in January. Warehouse shares have been under pressure since the start of the year, when it said it expects first-half earnings to fall about 20 percent to $37 million as cold, wet spring and summer weather forced it to discount clothing and other seasonal merchandise at its ‘red sheds’ general merchandise stores and sales declined at its Noel Leeming consumer electronics chain.

Investors and analysts have said they want the company to produce profit growth this financial year after the retailer spent hundreds of millions of dollars overhauling stores and buying new businesses the past few years.

Warehouse shares rose 1.4 percent to $2.86 in afternoon trading.