Foodstuffs could still stop the sale of Woolworths

By Mike Ross

Friday 21st June 2002

Australian retailer Foodland Associated quickly wrapped up its $690 million purchase of Woolworths this week after the High Court dismissed a challenge by competitor Foodstuffs to put the purchase on hold.

Foodstuffs, which operates under the New World, Pak 'N Save and Four Square brands, claimed the takeover should go back to the Overseas Investment Commission (OIC) for reconsideration.

After learning Foodland got conditional OIC consent for the purchase way back in August 2001, Foodstuffs argued it should have had a chance to express its views to the OIC and the government should have reconsidered the proposed takeover.

The effect of the takeover is to give Foodland 41% of supermarket retail sales through its Foodtown, Woolworths, Countdown and Big Fresh chains. Foodstuffs holds 55%.

Last week, Foodstuffs got an ex parte order from the High Court blocking the takeover. The order was overturned two days later, after a defended hearing before Justice Paul Heath.

The court was told solicitors acting for Foodstuffs wrote to the OIC last month, indicating it wanted to make submissions if the OIC was considering an application by Foodland to buy Woolworths.

As part of its "neither confirm nor deny" policy, the OIC did not let on that Foodland had been given conditional consent last August or that this consent was confirmed at the end of last month.

Justice Heath said the OIC was an administrative body that considered applications relating to foreign investment. Granting approval is a political decision. Competitors do not have a right to make submissions.

In lifting the ex parte order and allowing the purchase to continue, the judge said he was mindful of the need for certainty in commercial transactions, particularly when foreign investors were involved.

Foodland was then in the process of raising $690 million, both in debt and fresh equity, to finance the purchase. Commerce Commission consent for the takeover was due to expire on July 13.

Foodstuffs is still allowed to challenge the OIC approval in a full court hearing on Monday.

The judge ruled there was an arguable legal issue that the wording of the conditional consent given back in August last year, together with the statutory procedures governing OIC consent, meant the government should have been given the chance to reconsider Foodland's then proposed purchase.

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