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Greg Smith: Devon Funds Management expert unpacks the Warehouse takeover offer deal · Best of Business

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  Speaker 1: You're listening to a podcast from news Talk zed be
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  Speaker 2: Now. The takeover bid for the Warehouse Group that's been
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  Speaker 2: backed by Sir Stephen Tindall has made its pitch. Adamanton
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  Speaker 2: Capital has offered to buy the business for one dollar
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  Speaker 2: fifty to one dollars seventy a share, which values it
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  Speaker 2: at about five hundred and ninety million dollars in total.
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  Speaker 2: If the deal goes through, the Warehouse will be fully
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  Speaker 2: owned by a new entity that Sir Stephen will then own.
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  Speaker 2: Fifty percent of existing shareholders will be bought out for cash.
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  Speaker 2: Greg Smith is the head of Retail at Devin Funds Management.
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  Speaker 2: Heygrey good evening, hitders is good value for the shareholders.
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  Speaker 3: Oh, I think it looks well for perhaps Stephen Tindall.
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  Speaker 3: But yeah, it looks quite opportunistic. I mean when you
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  Speaker 3: think about it, you know the Warehouse has struggled, like
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  Speaker 3: a lot of retails, which includes Noel Leaming causing pressures.
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  Speaker 3: You've seen increased competition with Team, but they've also had
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  Speaker 3: problems of their own making we've talked about on this
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  Speaker 3: program and to their strategic positioning you know, they've lost
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  Speaker 3: this sort of identity or proposition with customers, and they've
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  Speaker 3: got involved in peripheral businesses like Torpedo seven in the
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  Speaker 3: marketplace which have since got rid of So plus I
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  Speaker 3: even't got a CEO, So yeah, it does seem to
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  Speaker 3: be quite opportunistic, particular if you've got perhaps a ray
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  Speaker 3: of light you have for the retail sector. If we
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  Speaker 3: do get that sort of rate cup from abn Z
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  Speaker 3: in a few months time with inflation for.
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  Speaker 2: Them, yeah, so what do you reckon? The shareholders may
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  Speaker 2: be better off to actually hold on to their shares
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  Speaker 2: and wait for things to bounce back.
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  Speaker 3: Well, we've got to see what the independent directors come
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  Speaker 3: back with and in terms of you know that they'll
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  Speaker 3: get healthy assessment of value and that may leave scope
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  Speaker 3: for a revised off. Obviously, it has a range at
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  Speaker 3: the moment of a dollar fifty to a dollar seventy.
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  Speaker 3: It does require seventy five percent approval and obviously the
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  Speaker 3: board will sort of give their view on it, and
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  Speaker 3: obviously Stephen Tindall and his interests are not part of
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  Speaker 3: that seventy five percent. So I think it's probably stay
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  Speaker 3: put for now. You know, the shares have rallied from
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  Speaker 3: ninety cents to around about a dollar forty today. But
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  Speaker 3: if you look at that top end of the offer
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  Speaker 3: of a dollar seventy, you know that was where the
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  Speaker 3: shares were just back in December. So you'd have to think,
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  Speaker 3: you know, it feels that we're sort of at or
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  Speaker 3: near the bottom. Obviously, Yes, Steven's got some ideas about
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  Speaker 3: what he wants to do with the company going forward.
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  Speaker 3: Perhaps one of those is a further push into groceries.
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  Speaker 3: I mean, it seems to be an area that they're
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  Speaker 3: doing quite well at the moment. You would think regular
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  Speaker 3: as in the government would be receptive to a third player,
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  Speaker 3: and they've certainly got the site footprint to roll that out.
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  Speaker 2: Yeah, do you reckon it's a good idea to get
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  Speaker 2: into the groceries because it didn't work last time.
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  Speaker 3: It didn't work last time. But yeah, it's I don't
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  Speaker 3: think it's I think the sort of merit and having
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  Speaker 3: a crack sort of game. This one feels like there's
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  Speaker 3: excuse upon the appetite for doing it. You know, we
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  Speaker 3: do as I say, it's about twenty percent of their
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  Speaker 3: turnive and now, and you know where the warehouse obviously
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  Speaker 3: is historically not known as somewhere that people go and
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  Speaker 3: do their weekly shop. But they've tried it quite successfully
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  Speaker 3: in Auckland and Dean in places, and they're rolling in
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  Speaker 3: out sort of nationwide. So it sort of feels like
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  Speaker 3: they have a bit more idea about things this time around,
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  Speaker 3: and they have got that footprint there and this also compensate,
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  Speaker 3: you know, for the headwinds you know, the red Sheets
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  Speaker 3: have been encountering. As I mentioned, they're sort of look
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  Speaker 3: stuck in the middle. I suppose when you look at
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  Speaker 3: the retail side between Briscoes and Kmart and then you've
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  Speaker 3: got a team and the like. So yeah, perhaps groceries
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  Speaker 3: is going to be the way forward. And yeah, they
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  Speaker 3: do sort of sort of get the headlines when they
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  Speaker 3: sort of make an entrance that we will remember sort
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  Speaker 3: of Wheatboxgate and the five dollar dozen eggs. So you know,
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  Speaker 3: I could teach you sort of ruffle some feathers of
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  Speaker 3: the two big players.
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  Speaker 2: If he was to get a hold of control again,
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  Speaker 2: right this is sir Stephen. Do you think he'd want
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  Speaker 2: to sell off maybe nol Leaming or Warehouse Stationary or both.
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  Speaker 3: Yeah, it's quite it's quite a possibility. I think because
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  Speaker 3: it's they're not fit in a way, but you know,
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  Speaker 3: I suppose that it works well at times. And you
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  Speaker 3: think about COVID Noel Leaming did very very well Ember
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  Speaker 3: sort of about shopping and buying big ticket items. Now
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  Speaker 3: they're not with cost of living pressures and that's sort
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  Speaker 3: of whether warehouse, you know, if it's sort of cheaper
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  Speaker 3: end is helping to compensate. But they're not really a
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  Speaker 3: logical fit in that respect. So perhaps, you know, separating
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  Speaker 3: those two businesses sort of would be one way to go.
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  Speaker 3: And I think for sir Stephen obviously he would know better,
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  Speaker 3: but you know, would feels like a full circle moment
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  Speaker 3: going back to sort of nineteen eighty two and preps
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  Speaker 3: a swan swan song in terms of turning the business arount.
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  Speaker 3: But that's again preps and a reason why existing Shielders
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  Speaker 3: might want us to stay but longer at least hold
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  Speaker 3: out for a high price.
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  Speaker 2: Yeah, fair enough, Hey, Greg, thank you always appreciate your expertise.
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  Speaker 2: It's Greg Smith, the head of retail at Devin Funds Management.
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