Admantem Capital, Stephen Tindall lob $520m-$590m bid for The Warehouse

Stephen Tindall is bidding for the company he founded, The Warehouse, with Adamantem Capital. Picture: Bloomberg

Sydney-based Adamantem Capital Partners and Stephen Tindall on Tuesday lobbed a proposal for New Zealand’s most prominent discount department store chain, The Warehouse, offering between $NZ1.50 to $NZ1.70 per share.

Mr Tindall is the company’s founder and major shareholder, with DataRoom revealing he had teamed up with the Sydney-based private equity firm to make the offer.

The bid values the company at between about $NZ520m and $NZ590m.

Australian and New Zealand investment bank Jarden has emerged as a defence adviser to The Warehouse.

Adamantem, founded by former executives at Pacific Equity Partners, is using New Zealand advisory firm Craig’s, which is an affiliate of JPMorgan.

Shares in The Warehouse closed 25 per cent higher on Monday after the company confirmed a DataRoom report the private equity firm, with Mr Tindall, had approached the New Zealand-listed company about a privatisation.

The closed down almost 3 per cent lower on Tuesday at $NZ1.41.

After The Warehouse confirmed an approach in a statement on Monday, on Tuesday, it said it had received an “unsolicited, non-binding, indicative proposal” in the morning with a “view to entering into discussions about a potential acquisition of all of the company’s share at a proposed price in the range of $NZ1.50 to $NZ1.70 per share via a scheme of arrangement.

Mr Tindall and the Tindall Foundation, which own more than half of the company, will remain as owners.

The Warehouse said they would remain invested in the company through reinvesting a portion of their consideration in the acquirer of the ocmpany, resulting in the founder shareholders having a shareholding of up to 50 per cent in the acquirer.

All other shareholders would receive cash if the deal went through, which required 75 per cent of shareholders who vote on the transaction to be in favour.

The company has told shareholders to take no action.

The offer is considered opportunistic, as it comes after a period of poor performance for The Warehouse, with shares trading at below $NZ1 per share before the offer emerged — more than three times lower than a year ago.

As earlier reported, Mr Tindall, who founded The Warehouse in 1982, has had long-held aspirations to expand further into New Zealand’s grocery market and made a bid to privatise the company in 2006, worth $1.6bn, backed by PEP.

However, Foodstuffs and Woolworths each took 10 per cent blocking stakes in The Warehouse and he abandoned the bid.

Some describe building a third major grocery chain in New Zealand to compete with Australia’s Woolworths and Foodstuffs would end up a 10- to 20-year project, but demand for affordable groceries is strong in New Zealand, currently in a recession following high inflation.

The entry into the market of US-based Costco has been a major success, with overwhelming demand, while Temu and Amazon generate strong revenue from across the Tasman.

But, The Warehouse has faced heavy competition in the discount department store market, where it operates from groups like the Wesfarmers-owned Kmart and as it searches for a new chief executive, some believe it has “lost its way”.

Woolworths, with Countdown supermarkets, is one of the two major grocery companies, rivalling Foodstuffs, itself owning Pak n Save, New World and Four Square.

There are concerns about the stranglehold the major players have on the NZ industry, with the NZ government launching a grocery code of conduct last year.

Known as The Red Shed, The Warehouse has become one of NZ’s most iconic retailers. Tindall’s son Robert serves as a director on the board.

The shares were worth more than $NZ7 per share in 2007.

For the six months to January 28, The Warehouse reported a $NZ23.5m loss.

The group already sells some grocery items, contributing to 18.7 per cent of its revenue last year.

The company in the past financial year had 246 stores, including 88 The Warehouse stores, 66 Warehouse Stationery stores, 67 Noel Leeming stores and 25 stores of Torpedo7, which it sold earlier this year for $NZ1 following poor performance.