Dairy Farm sells New Zealand arm for $337M


Dairy Farm sold some of its Australian Franklins stores to Woolworths and Foodland last year

By Geoff Hiscock
CNN Asia Business Editor

SYDNEY, Australia (CNN) -- Hong Kong-based Dairy Farm International has sold its Woolworths supermarket chain in New Zealand for NZ$690 million ($337 million).

Dairy Farm announced the deal in Hong Kong on Tuesday night, saying it would realise a gain on the sale of more than $200 million.

The buyer is West Australian retailer Foodland Associated Ltd, which asked the Australian Stock Exchange for a trading halt Tuesday morning after speculation intensified that an announcement was imminent. The halt remains in place Wednesday.

The two companies renewed their negotiations after New Zealand's Privy Council on April 30 cleared the way for a bid by Foodland's New Zealand supermarket operator Progressive Enterprises.

July 13 deadline

New Zealand's Commerce Commission had set a deadline of July 13 for Foodland to complete any deal to buy Woolworths (New Zealand), which has 85 supermarkets and 26 mini-marts and annual sales of about $670 million.

Dairy Farm said it expected to complete the sale "in early July".

Foodland already has supermarkets in New Zealand, plus the Farmers department store chain, and has previously bought stores from Dairy Farm in Australia. It has been angling for the group's New Zealand operations since last year.

Dairy Farm, one of the biggest food and drugstore retailers in the Asia Pacific region and part of the Jardine Matheson Group, announced in April last year that it was quitting its Australian operations.

It later sold off its loss-making Franklins discount chain in Australia to a number of buyers.

They included Australia's biggest supermarket chain, Woolworths, which paid about $119 million for 67 of the 282 stores on offer, and Foodland, which bought 36 stores for $80 million. Another group, Pick'n Pay, bought 53 stores for $52 million(Full Story).

Dairy Farm group chief executive Ronald Floto said in a statement Tuesday night the company was "extremely grateful" to the Woolworths New Zealand team for their contributions to the group.

"The sale, however, will allow us to concentrate our investment and management attention in our key markets in Asia," he said.

The Dairy Farm sale has raised speculation that Foodland could now become a takeover target for Australia's largest supermarket operator, Woolworths, which has not been related to its New Zealand namesake since 1979.

Market commentaries suggest that once Foodland's merger of its Woolworths New Zealand and Progressive Enterprises operations is successfully completed, Woolworths Australia might be tempted to launch a takeover bid for Foodland.