Foodstuffs in court to halt Woolworths NZ takeover

By NZPA

Thursday 13th June 2002

Grocer, Foodstuffs NZ Ltd, said today that the Overseas Investment Commission (OIC) had failed to properly apply rules on overseas investment when it approved a planned takeover of Woolworths NZ by Australia's Foodland Associated.

Cooperatively-owned Foodstuffs, New Zealand's biggest grocery operator, opened its claim for a judicial review of the actions of the OIC after it gained a temporary High Court injunction yesterday, halting any further action on the acquisition.

Foodland announced on Tuesday it had agreed to buy Woolworths NZ for $690 million from Hong Kong-based Dairy Farm International Holdings Ltd after months of court and competition hurdles.

Foodstuffs submitted to the court that the OIC had not applied the necessary requirements of foreign investment laws when it approved the takeover.

Foodstuffs said the deal involves substantial interests of land and therefore should be carefully considered by the OIC, which approved Foodland's purchase yesterday.

Foodstuffs argued that in December when Foodland was attempting to gain Commerce Commission approval, the watchdog ruled the purchase would result in reduced competition and because of that the test of national interest could not be met by the OIC. The OIC has to take national interest into account when making its decisions.

Foodlands said that if a decision was not made quickly -- today or tomorrow -- then it could potential threaten the deal, especially its $A300 million ($NZ352 million) associated capital raising. It accused Foodstuffs of running an interference campaign.

Before the court hearing Foodstuffs, which has around 55 percent of the New Zealand grocery market, repeated its stand that the Foodland acquisition was anti-competitive.

Foodland, through subsidiary Progressive Enterprises, operates around 70 supermarkets in New Zealand with a 24 percent share of the market, while Woolworths has 85 stores with a 20 percent market share.

"We have consistently said that reducing the number of supermarket operators in this country from three to two will substantially reduce competition," Foodstuffs said in a statement.

The battle culminated in April when Britain's Privy Council, New Zealand's ultimate court of appeal, cleared Perth-based Foodland to pursue the acquisition despite moves by New Zealand courts and competition regulators to block it.

"Foodland Associated Ltd believes there are no valid reasons for the order to be maintained and that this is a transparent, last ditch attempt by Foodstuffs to oppose the increased level of competition to which it will be exposed when the transaction proceeds," Foodland said.

Foodland's capital raising is through an institutional placement and rights issue to help fund its New Zealand expansion.

The hearing is expected to be wrapped up this afternoon and a decision will probably be made tomorrow.

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