Warehouse Group shares up 25% on takeover interest
Monday, 22 July 2024
The Warehouse Group shares surged 25% on Monday afternoon, following an update from the company and a “do not sell your shares” notice to the NZX.
The retail company that operates The Warehouse, Noel Leeming and Warehouse Stationery received interest from Warehouse founder Sir Stephen Tindall and private equity group Adamantem Capital Partners to acquire its shares.
Interest in the stock reached a recent high after Tindall’s desire to take the company private was revealed.
There has been speculation that the Warehouse Group intends to change direction and become a third supermarket to take on Foodstuffs and Woolworths.
Tindall already owns a 27% stake in the company and the Tindall Foundation a 21.3% stake.
On Friday, the Warehouse stock closed trading at $1.16. Shares are currently sitting about $1.45 each.
On Monday morning, the Warehouse Group advised its shareholders not to sell shares “pending further advice from the directors”, acknowledging the interest from Tindall and Adamantem Capital Partners.
“The board of directors cautions shareholders that the approach received did not constitute an offer by any person to acquire the business of the company or shares of the company, and that it, and any consideration of other alternatives, may not result in any proposal,” it said in the NZX announcement.
The retail sector has been going through tumultuous times, and this has been felt acutely by The Warehouse.
The group is bracing for a drop in earnings, and has been quietly restrategising in recent weeks following the departure of its long term chief executive Nick Grayston in May.
Shortly after Grayston left, the Warehouse announced leadership changes within its management team, and last week the troubled retailer said it would pushing on with a restructuring at its Auckland head office, aimed at refocusing the company and bringing down costs.
The Post has made multiple attempts to talk to management in recent weeks.
Analyst Mohandeep Singh of Craigs Investment Partners said it was an unusual move for a company to issue a “do not sell shares” notice to its shareholders.
Singh said it looked like there had been conversations between the Warehouse board and Tindall, and the company had felt obliged to acknowledge those conversations to the market.
“It's definitely a pretty torrid time for the sector and for The Warehouse at the moment.
“I don't know what Tindall’s plans are. Maybe he sees there's opportunities to improve from here, which clearly the share price suggests that there is an opportunity to improve, and the market’s obviously liked that. I'm not sure if they liked that because it's Sir Stephen Tyndall along with the private equity firm. He’s a large shareholder, and he's got a pretty positive history with that business,” said Singh.
He said The Warehouse still had not confirmed a new permanent CEO, and any major change in strategy or direction would need a CEO confirmed beforehand.
Commenting on speculation of Tindall’s desire to take The Warehouse private, Singh said if it was to de-list from the stock exchange, it could follow in the steps of Arvida, where an individual saw more value in the business than what the share price reflected.
“We have no idea what they're going to do. We don't know who's going to lead them. We don't know what their strategy is going to be. We don't know if they're going to stay listed.
“But, if you look at the sector as a whole, the economy is still under a lot of pressure and probably not going to improve in the short term. Every major bank is bringing forward the expectations of interest rate cuts because inflation is under control.
“I suspect it will be a hard slog for the lion's share of the rest of this year, things will remain tough, but that interest rate cut, if and when it happens from [RBNZ Governor] Adrian Orr, will certainly give that light at the end of the tunnel.
“Coming into 2025, assuming you get a cut or two this side of Christmas, then things will start to look better for the economy.”