Singapore food retailer Dairy Farm International said today [Tuesday] it would sell its New Zealand supermarket operation Woolworths (NZ) to Australian grocer Foodland Associated.
The deal will be concluded for US$337m in cash, the group announced.
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In buying Woolworth#;s (NZ), Foodland has fought off stiff competition from Woolworths Australia, which is unrelated to its New Zealand namesake. The deal nearly doubles Foodland#;s stake in the New Zealand grocery market, where it is already a major player through its ownership of Progressive Enterprises. It will become the second largest player behind the market-leading Foodstuffs groupl.
Foodland is expected to undertake a A$300m (US$171m) equity raising to finance the takeover. Trading in Foodland shares has been halted today pending a formal Stock Exchange announcement.
The deal involves the entire Woolworths (NZ) operation, including three warehouses, 85 supermarkets and 26 mini-marts under various fasciae.
In a statement, Dairy Farm chief executive Ronald Floto called Woolworths a “fine, high performance company” but said the sale would allow the group “to concentrate our investment and management attention in our key markets in Asia”.
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By GlobalData“Dairy Farm will realise a gain on the sale in excess of US$200m,” the statement said, adding that the disposal was expected to be completed by early July.
Analysts were in agreement that the acquisition would be positive for Foodland as increased buying synergies reaped cost savings. Speculation has started circulating Foodland#;s increased scale could make it a target for an opportunistic takeover, with Woolworths of Australia and Tesco of the UK mooted as potential buyers.
