Danone ponders next move after Frucor rejection

By ELLEN READ

Groupe Danone's tilt at taking over Frucor has been knocked off its horse after Frucor's independent directors rejected the French giant's offer, saying it was not high enough.

But Danone is not saying whether it will raise its bid as a result.

"We will be considering all of our options, including letting the current bid lapse, if the condition of 90 per cent acceptance is not satisfied," the managing director of Danone Asia, Simon Israel, said yesterday.

He said he had several concerns about a report from investment banker Grant Samuel and would seek clarification from Frucor on some issues. In particular, he said, the valuation was based on aggressive growth projections which lacked supporting evidence.

Frucor is forecasting a 37 per cent jump in net profit to $16 million in the year to next June.

Earnings before interest, tax, depreciation and amortisation (ebitda) were projected to rise 25 per cent to $32.5 million - despite ongoing losses in Britain. Operating revenue was expected to rise to $272.5 million from $228.4 million.

Frucor's independent directors told shareholders that Danone's offer of $2.35 a share was not acceptable.

"Grant Samuel has assessed the value of Frucor shares in the range of $2.53 to $2.96 with a midpoint of $2.74 and advise that the offer for the shares is neither fair nor reasonable," they said.

Danone, the world's biggest water bottler, launched its $294 million bid for Frucor last month.

Frucor's major shareholder, Pacific Equity Partners, has already accepted the offer for its 38 per cent stake, but is entitled to more money if Danone raises its offer.

Frucor chairman Simon Pillar and director Rickard Gardell have also accepted the offer for their personal shareholdings.

Frucor's next largest shareholder, JP Morgan, will not sell its 5 per cent stake for the amount offered.

"We have no intention of selling at anywhere near that level," said Pierre Prentice of Jardine Fleming, which is 50 per cent owned by JP Morgan. He values Frucor at more than $3 a share.

Danone's offer - which will remain open until December 7 - is subject to it buying more than 90 per cent of Frucor shares.

Grant Samuel said that although no alternative bidder had yet emerged for Frucor, Danone was likely to match or better a higher bid should one emerge.

Frucor shares lifted to close up 5c at $2.50.