Fonterra raises stakes in National Foods bidding war

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New Zealand dairy co-operative Fonterra has upped its share price
offer for Australia's leading dairy company National Foods,
trumping a rival bid from San Miguel Corporation (SMC) and gaining
the unanimous backing of National Foods' executive board, Tom
Armitage reports.

Auckland-based Fonterra announced today that the revised bid will see its previous offer of AUS$5.45 per cent lifted to AUS$6.00 per share - 10 cents higher than SMC, the Philippines-based drinks conglomerate.

Conversely, if the dairy co-operative acquires more than 90 per cent of National Foods, then its offer per share could be increased further to AUS$6.20, valuing the company at around AUS$1.9 billion.

The dairy co-operative has been locked in a bidding war with SMC since October last year, after its initial hostile offer of AUS$1.62 billion was trumped by an offer from SMC of AUS$1.78 billion.

National Foods' executive board previously criticised Fonterra's bid last year of AUS$5.45 per share for being too low, claiming that its shares should be valued in the region of AUS$6.11-AUS$6.65.

SMC's rival bid, however, recently fell below the board's valuation range after National Foods posted a dividend payout of 10 cents per share - effectively lowering San Miguel's offer to around AUS$5.90.

"Fonterra's proposal represents a significant premium to National Foods' market price prior to the announcement of Fonterra's offer,"​ commented Fonterra Chairman Henry van der Heyden.

"An offer of AUS$6.20 would represent a 35 per cent premium to the National Foods share price on 27 October 2004, the day before Fonterra announced its original offer, after accounting for the 10 cent dividend paid on 31 January 2005. The offer of AUS$6.00 represents a 30 per cent premium on the same basis,"​ he added.

Despite already owning a 19.02 per cent stake in National Foods, Andrew Ferrier, Fonterra's CEO noted that the company had assessed SMC's offer and completed due diligence on National Foods (on which it had been working since 2 February).

"The due diligence confirmed our assessment that National Foods presents a valuable strategic opportunity for Fonterra,"​ Ferrier said.

Meanwhile, a number of legal technicalities have been resolved for both bidding parties. The Australian Competition and Consumer Commission (ACCC) cleared SMC's bid proposal earlier this week, while Yoplait's French licensing owner Sodiaal has agreed to continue to support National Foods under Fonterra ownership (Yoplait is one of National Foods most lucrative consumer brands alongside YoGo and Fruche).

If Fonterra is eventually named the absolute owner of National Foods, Ferrier hinted that the dairy co-operative would consider establishing a joint venture with Yoplait, although conceded that this decision would be taken at a later date.

Fonterra confirmed that it would waive all conditions on its revised offer, providing National Foods shareholders opt for a 50 per cent minimum acceptance condition.

Shareholders have until 29 March to decide whether to accept Fonterra's bid, while SMC has until 11 March to table a revised offer - a possibility that analysts have not yet written off.

Related topics Manufacturers Fonterra

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