Foodland on counter-attack

MELBOURNE - Australian grocer and takeover target Foodland Associated yesterday rejected Metcash Trading's "inadequate" hostile bid and said it planned its own demerger of its Australian and New Zealand businesses.

In New Zealand, Foodland owns supermarket chains Countdown, Foodtown and Woolworths.

Foodland chief executive Trevor Coates said a demerger would probably take about four to six months and would need shareholder approval. "The board is of the view that will realise greater value for shareholders in that way, than having the combined entity."

Metcash says it plans to retain Foodland's Australian business and spin off the New Zealand operations into a separate company.

But Foodland chairman Len Bleasel said it was uncertain about when the proposed spin-off of the New Zealand business would happen under Metcash and there was a risk to the operation of the business under Metcash before the spin-off.

In takeover defence documents, Foodland said an independent expert's report it commissioned valued Foodland at A$24.86 ($27.33) to A$27.33 a share, compared with a value of A$20.93 to A$23.30 a share that it put on the Metcash offer.

Metcash said in its takeover documents that its bid valued Foodland at between A$21.26 and A$26.62 a share.

Metcash has offered A$7.18 cash a share or 2.44 Metcash A shares, to reflect the value of the Australian business, plus one share in the New Zealand spun-off company.

Shareholders would also retain a forecast interim dividend of 43Ac a share.

Foodland said it was not considering a counterbid for Metcash.

Metcash, a grocery wholesaler, launched its bid for Foodland in December as it aims to build a stronger rival to Australia's top two food and liquor chains, Woolworths and Coles Myer.

- REUTERS