The Warehouse Group Ltd: Takeover Speculation Resurfaces

Update 27 June 2011, Woolworths keen on expanding WHS stake

I am going to speculate on some speculation in Businessday this morning that the appointment of Ted van Arkel as an independent director of The Warehouse Group Ltd [WHS.NZX] means the sale of the company is back on the table.

Van Arkel has a long history and ties to retail in both New Zealand and Australia and has a hard nosed reputation both as a former managing director of Progressive Enterprises, owned by Woolworths Ltd [WOW.ASX] and as an independent director of multiple boards and chairman of Restaurant Brands Ltd [RBD.NZX] and Charlie's Group Ltd [CHA.NZX]. He has also known Stephan Tindal and chairman Graham Evans for a long time, working with Tindal, through George Court, and Evans through Woolworths.

Van Arkel's links to Australasian retail maybe indeed be just a sideshow in terms of where the Warehouse is heading and he maybe there for his vast retail experience but I don't think fresh blood on the board like this is an accidental appointment apart from his resume.

Van Arkel's links to Woolworths are strong and as that company is a 10% shareholder of the company his connections here are significant. With Charlies, as chairman, he has recently presided over two big deals to get Charlies products onto Woolworth's shelves in Australia and in the stores of competitor Coles, owned by retail giant, Wesfarmers Ltd [WES.ASX]

With Restaurant Brands, under his time there, the company has transformed itself from a dog into a flourishing peacock in terms of performance and customer service. Van Arkel seems to be the goto guy if you want a director to lead to the way to better performance in retail.

He appears to be behind the brand change image of Postie Plus Group [PPG.NZX] which sadly, thus far, has failed to gain much traction or indeed profit.

His reputation as a retail "Mr Fix It" appears not to be a coincidence as The Warehouse is currently stagnating in terms of sales and profit and the introduction of such a director with such strong ties to retail in this part of the world is a significant move if Van Arkel's past has anything to go by.

While Van Arkel's appointment is not a clear sign that The Warehouse is back on the block, what is crystal clear is that his place with the company as an independent director means some significant change for the company in the months and years ahead.

His inclusion on the board does make a sale more likely because of his past track record but it is not a given.

Disclosure: I own WHS shares in the Share Investor Portfolio

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c Share Investor 2011

Restaurant Brands consider slicing off Pizza Hut

With a certain sense of satisfaction, the fact that Restaurant Brands [RBD] would consider putting up their loss making Pizza Hut Franchise up for sale is great news for shareholders.

I have been banging on for years about management cutting their ties because of the clear implications of what keeping the brand means for the company as a whole-certain death.

The only mystery to me is that is took Ted Van Arkel, the chairman of RBD so long to even consider making this announcement to the market.

While they are at it they might also like to consider ditching the loss making Starbucks as well. It isn't as bad as Pizza Hut but is doesn't make money!

KFC is the relative star of the show and that is where management and their energies should be concentrated on because I think they lack the management depth to successfully run two major fast food brands.


RBD prepared to quit Pizza Hut

1:30PM Thursday June 19, 2008, NZPA

The Pizza Hut New Zealand chain could be put up for sale if owner Restaurant Brands is unable to turn it around.

Describing Pizza Hut as his company's "Achilles' heel", Restaurant Brands chairman Ted van Arkel today said the board would consider any actions that might end the drain by Pizza Hut on company profits.

That would include its sale if a turnaround was not forthcoming. In the meantime, the company was redoubling its marketing efforts to hold the line in the current economic climate, Mr van Arkel told Restaurant Brands' annual meeting.

He also said Pizza Hut was in a better position than its competitors.

"The pizza market is crowded and price sensitive. Our competitors, all single-brand operators, are also hurting," he said.

"We are increasingly seeing our competitors' pizza franchises on the market, desperately looking for buyers. Several have already gone to the wall."

Pizza Hut, on the other hand, had the backing of Restaurant Brands, which had demonstrated that it could manage brands successfully over the longer term, Mr van Arkel said.

Restaurant Brands, which also has brands KFC and Starbucks Coffee, was in a strong position to weather an economic shakeout and continue to build its brand presence, but many individual operators of single-brand franchises were not.

"With lower levels of disposable income among consumers, all three of our brands remain very competitive and offer good value for money to the increasingly selective consumer dollar," he said.

"We see the economy in the next 12 months as being challenging but not dire."

Restaurant Brands' flatter first quarter for 2008/09 was evidence of the more difficult trading conditions all retailers were facing and second quarter sales to date looked to be slightly behind last year.

"However, we do expect our reliable earners, KFC and Starbucks, to buck the national trend, even if sales do ease."

The next 12 months would be critical for the national pizza market. At any one time as many as 40 rival franchises were up for sale and Restaurant Brands expected that number to rise as the economy slowed, Mr van Arkel said.

In the chicken market, three competitor stores had already closed in the past six months.

Restaurant Brands' total first quarter sales across its three brands, for the 12 weeks to May 19, were $69.8 million, a decrease of 0.9 per cent on the equivalent period last year, although same-store sales were up 0.4 per cent.

Restaurant Brands shares closed yesterday at 85c, and today Mr van Arkel said the company's directors did not consider that price to reflect intrinsic value.

Broker analysts considered the stock worth buying up to around $1.25.

He also advised shareholders that directors were proposing to ask for an increase in their fees at next year's annual meeting, subject to a satisfactory result for the year.

Directors' fees have not been increased since 1998 and no longer rewarded board members adequately for their input, he said.

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c Share Investor 2008