UPDATE 2-Court clears bids for NZ's Warehouse, shares soar

(Updates with analyst comment, company reaction)

By Adrian Bathgate

WELLINGTON, Nov 29 (Reuters) - Australian grocery chain Woolworths Ltd (WOW.AX) and New Zealand co-operative Foodstuffs won court clearance to bid for The Warehouse Group Ltd (WHS.NZ), sending shares in New Zealand's largest listed retailer up nearly 25 percent.

Woolworths and Foodstuffs said they had not yet decided whether to launch a formal takeover for The Warehouse, which has been valued at up to NZ$2.5 billion ($1.9 billion) and sells goods ranging from clothing to books to hardware in some 85 "Red Shed" stores.

The court decision on Thursday upheld an appeal by all three companies against an earlier ban on bidding by New Zealand's competition regulator.

Both Woolworths and Foodstuffs had the financial muscle to pursue a takeover of The Warehouse, said Walker Capital Management principal Craig Brown.

"From what Woolworths has implied, it wouldn't be a surprise to see a bid from them, whereas Foodstuffs has been a little bit more tight-lipped about what they'll be doing," Brown said.

Shares in The Warehouse, which was modelled on discount chain Wal-Mart Stores Inc (WMT.N), hit a high of NZ$6.21 and last traded up 23.25 percent at NZ$6.19. The stock is still down almost 15 percent this year in a flat broader market .NZ50. Shares in Woolworths, which recently missed out on buying the general merchandise unit of Australian retail group Coles, rose 2.8 percent to A$32.92.

The Warehouse is about 50 percent owned by founder Stephen Tindall and interests close to him. Tindall has yet to state whether he would support any takeover bid for the company.

The court's reasons for overturning the ruling will be released on Friday. The Warehouse has been studying an expansion into hypermarkets, selling groceries as well as general merchandise, but has put the proposal on hold while it reviews the success of three trial stores.

The potential move into groceries was the main reason cited by the competition regulator in its June decision to deny bidding permission.

Woolworths and Foodstuffs dominate grocery retailing in New Zealand. Foodstuffs has about a 53 percent market share and Woolworths 47 percent.

The commission said it was disappointed by the decision. It still held concerns over a lack of competition in the supermarket sector, and would study the judgment before deciding whether to appeal.

No formal offers have been made by either company for The Warehouse, although sources have said that Woolworths made a written offer of NZ$7.15 a share in April, subject to regulatory approval.

Woolworths has long targeted the Warehouse as the best way to enter the general merchandise market in New Zealand.

"We continue to consider all opportunities to invest in and develop our business in New Zealand," a Woolworths spokesman said.