Woolworths and Lowe’s to enter confidential arbitration as court puts stay on winding up application

A court has sent Woolworths and Lowe’s back to the negotiating table, putting a stay on a winding up application.

A Masters hardware store in Portsmith. (PICTURE: BRENDAN RADKE)

Woolworths has won a stay of the winding up application filed by one time partner Lowe’s in the Masters hardware chain. The dispute will now be heard behind closed doors by former High Court justice Murray Gleeson.

Despite the court win, the timing of Woolworths’ exit from Masters remains uncertain, which could reduce the returns that it receives from the sale of its stake in the venture.

There is also some uncertainty about its plans to retain $105 million worth of properties as part of the $830m deal it struck to sell the property portfolio to a consortium led by former UBS investment banker David Di Pilla.

The Federal Court in Sydney today ruled on the high-profile legal stoush between Australian retailer Woolworths and its estranged partner in the Masters hardware business, US giant Lowe’s.

Lowe’s ­argued that the dispute should be heard in open court, while Woolworths pushed for it to be sent to arbitration to be overseen by former high court chief justice Murray Gleeson.

The case has dragged the conduct of Woolworths and its advisers, liquidators KordaMentha and investment bank Citi, in the final days of the $1.5 billion fire sale of Masters, into the spotlight.

The publicity has been unwelcome for the Australian retailer which has insisted it is on track to exit Masters. Both it and David Di Pilla, the former investment banker and ­architect behind a consortium of private investors set to seize 82 Masters sites for $750m, are standing by their deal.

Mr Di Pilla’s backers, who include the billionaire families behind retailer Spotlight, Chemist Warehouse and members of Sydney’s wealthy Salteri family, have signed deals to buy up to 61 Masters stores and another 21 development sites. The fate of another 13 sites carved off from the sale tranche may come into question as the case rolls on.

Lowe’s last month initiated surprise legal action after months of talks to sell its one-third stake in Masters back to majority owner Woolworths.

It brought the matter to a head last month by seeking an order to appoint an independent liquidator to oversee the winding up of Masters.

The action by Lowe’s has unearthed a potentially damaging “game plan” by Woolworths and its advisers to terminate the ­venture.

Lowe’s, which had earlier blasted Woolworths for “oppressive conduct’’ and acting in “bad faith’’ over the planned shutdown of Masters, has indicated its dissatisfaction with events in the lead-up to a meeting of Masters directors in late August.

The meeting, ahead of Woolworths’ full-year results last month, may have been explored further if the case had proceeded to court.