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Bidding on Dairy Farm International Holdings' New Zealand supermarket business has restarted in earnest with reports that Australian grocer Woolworths has jumped into the fray.

Woolworths, Australia's biggest supermarket chain, has expressed an interest in buying Woolworths New Zealand, owned by Hong Kong-based Dairy Farm, a 69 per cent-owned unit of Jardine Matheson.

Dairy Farm confirmed yesterday it had had several discussions with Woolworths in recent weeks, even though the Australian company rejected a potential takeover of Woolworths NZ last year as being too pricey.

Dairy Farm finance director Howard Mowlem said: 'We have had several discussions with Woolworths in the past few weeks.'

Woolworths joins Perth-based Foodland Associated in the bidding for Dairy Farm's New Zealand operation, worth an estimated NZ$700 million (about HK$2.56 billion).

Mr Mowlem said Dairy Farm continued to be 'in talks with Foodland', with which it has been in discussion since April 30.

'They remain an interested party,' Mr Mowlem said. However he declined to say more, noting a non-disclosure agreement between the two sides.

Foodland has been in the hunt for a deal with Dairy Farm for nearly a year. But hopes for a quick conclusion were dealt a blow by a New Zealand court in December when it ruled against the deal on anti-competitive grounds.

Foodland already has a 24 per cent share of the New Zealand grocery market through its Progressive Enterprises arm and competition authorities were worried it would become too dominant in the market.

But the Privy Council in London, still the highest court of appeal for some Commonwealth nations, found in favour of Foodland last month, clearing the way for a deal.

Woolworths NZ operates 96 supermarket outlets across New Zealand, which, unlike Dairy Farm's disastrous foray into Australia's grocery market via Franklins, are profitable.

Dairy Farm began its retreat from the Australian market in April last year, selling its grocery business in the country piecemeal in a series of deals that totalled about A$400 million.

By contrast, Woolworths NZ made an operating profit of US$22.7 million for the year ended December on sales of US$668.5 million.

Woolworths chief financial officer Bill Wavish told Reuters yesterday that 'we retain an interest in Woolworths NZ'. But he said that talks had progressed little so far.

Foodland would be a more logical buyer for Woolworths NZ than Woolworths, which does not already have operations in New Zealand.

As such, Foodlands would be better able to exploit potential synergies with the Dairy Farm unit.

'It is quite correct that Foodland already has operations in New Zealand, whereas Woolworths does not. Foodland would be the buyer with the greatest synergies because they already have operations there, and it would be a good fit for them,' Mr Mowlem said.

However, he said Dairy Farm's priority would be to get the highest return on its asset, were Woolworths NZ to be sold.

Woolworths NZ was founded in 1929 by Percy Christmas, who also started the Australia-based Woolworths.

Woolworths NZ began as a general merchandise store, not entering grocery retailing until 1956.

Dairy Farm acquired the New Zealand company in 1990.



Woolworths in chase for Dairy Farm unit