KEY POINTS:
In a surprise twist to the battle for Open Country Cheese, Bruce Clothier has broken ranks with his fellow independent directors and sold his shares to a takeover offer by rival milk processor Dairy Trust, which appears to have succeeded.
Fearing Open Country might fall into foreign hands,
Clothier has accepted Affco subsidiary Dairy Trust's higher offer, which it claims will give it enough agreements to assume control.
The increased offer of 1.75 Dairy Trust shares for each Open Country share values the Waikato dairy exporter's stock at $2.35, 10c higher than its original offer, which Clothier and fellow independent directors Wyatt Creech and Duncan Milne said was inadequate.
Clothier's move puts him at odds with Creech and Milne, who sold some of their shares to Singapore agricultural commodities group Olam International in mid-June for $3.20 a share, considerably more than Dairy Trust's original offer, which valued Open Country shares at $2.25.
Milne had a 5.4 per cent stake in Open Country and Creech 1 per cent.
Asked if other shareholders should have been given the opportunity to sell to Olam at $3.20, Milne said that was up to the broker, who had contacted major shareholders.
"Olam wanted to accumulate as fast as possible so I guess its natural inclination was to get the broker to ring around the largest shareholders first."
But Clothier said his fellow independent directors' decision to sell to Olam had come as a surprise.
"I didn't know that had happened, and I thought, 'We'll stop that deal and keep [Open Country] in New Zealand ownership'," he said.
Although Olam has said it is not interested in increasing its 19.9 per cent stake further, Clothier said he agreed to accept Dairy Trust's offer after he learned that Olam was conducting due diligence with that in mind.
"But when [Dairy Trust] got their 50.1 per cent they [Olam] pulled out."
When it announced its offer in May, Dairy Trust said it had agreements for 42.5 per cent of Open Country, including the Talley family's 29.9 per cent, Dairy Investment Fund's 9.6 per cent and Balle Bros' 3 per cent. It needed 7.6 per cent more to reach the 50.1 per cent for the offer to succeed.
But Clothier's holding - via Waharoa Industrial Park Ltd - is 1.1 per cent of Open Country, leaving 6.5 per cent unaccounted for.
Although the next biggest shareholder after Milne - John Luxton, with 3.8 per cent - could not be contacted, Milne understood the former National Cabinet minister had not agreed to Dairy Trust's offer.
Richard Metcalfe and Paul Collins, also with 3.8 per cent, were also understood to be resisting, and Paul Yortt had sold his 2.72 per cent stake to Olam in mid-June.
Clothier said Open Country chief executive Alan Walters had also agreed to Dairy Trust's revised offer through an associated company, Jaswa, but his holding is not in Ferrier Hodgson's listing of top 20 shareholders and so must be below 0.6 per cent.
Milne denied it was important for Open Country to remain in New Zealand hands. "I'm not xenophobic."
He said he stood by his earlier statement that shareholders should not accept the original swap rate and said he and Creech would review their positions when they received the official notice of variation later in the day.
"You don't have to be Einstein to see that it's not much improvement."