Wellington, Oct 10 NZPA - Analysts and potential bidders remain ambiguous about a takeover of The Warehouse but the retailer's shares soared almost 13 percent yesterday, indicating the market believes it likely.

The Warehouse is closing down its Warehouse Extra stores at a cost of $12 million because people shopping for food did not buy as much general merchandise as hoped.

The withdrawal was significant because Foodstuffs and Woolworths were prevented from bidding for The Warehouse by the Commerce Commission because of The Warehouse's potential to compete in grocery retailing.

Key to that potential was the Warehouse Extra stores.

The Warehouse's shares closed up 40 cents at $3.49 yesterday.

James Smalley, a client adviser with Hamilton, Hindin, Greene, said the share price had had a takeover premium added to it.

Minter Ellison Rudd Watts competition law expert Andrew Matthews said the law was now unlikely to stand in the way of a takeover.

However, the Commerce Commission may ask The Warehouse to prove it did not exit selling groceries to allow a takeover and may still see the retailer as a potential competitive threat in the supermarket sector, Mr Matthews told Radio New Zealand.

Forsyth Barr analyst Guy Hallwright said Woolworths was likely to be the most serious buyer.

Foodstuffs and Woolworths both have 10 percent of The Warehouse and founder Stephen Tindall and family interests have 52 percent.

Woolworths said it was evaluating its appeal to the Supreme Court challenging the Commerce Commission's decision.

Foodstuffs managing director Tony Carter said his advice was that there was now nothing to prevent either Foodstuffs or Woolworths from bidding.

"We wouldn't rule anything in or anything out," he said.

He said Foodstuffs was talking to "lots of people" but would not confirm if one was Pacific Equity Partners.

Woolworths said it has not made a decision in respect of its shareholding in The Warehouse or any proposal.

"Woolworths continues to monitor the performance of The Warehouse, the New Zealand retail climate, financial market conditions and the outlook for the New Zealand economy."

It is believed that the Tindall camp has not had formal talks with anyone and is watching to see what develops.

The Commerce Commission said its existing decision is subject to appeal so it could not comment.

Warehouse chairman Keith Smith said the fresh produce, meat and frozen foods would be withdrawn from the three existing Extra stores within the next six months.

The pharmacy and health and beauty category areas are to remain.

"A decision has yet to be made in respect of liquor currently ranged in six of the company's 85 stores."

Managing director Ian Morrice said the Extra stores had been an important trial for the retail chain.

Foodstuffs and Woolworths together have about 96 percent of the grocery market in New Zealand.

Foodstuffs runs New World, Pak'nSave and Four Square stores. Woolworths has Woolworths, Countdown, Foodtown, Supervalue and Fresh Choice.

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