Paul McIntyre: Fonterra versus 'The Boss'

What an intriguing Australian sandwich Fonterra's 12,000 dairy farmers have landed in their quest to acquire National Foods.

On one side they've got those naughty, opportunist hedge funds continuing to nudge up National's share price in the hope of a quick trading profit.

On the other, they're up against a man running the rival bidder, San Miguel, who was a member of the regime of former Philippines President Ferdinand Marcos.

Filipino anti-corruption authorities are still investigating Eduardo Cojuangco and control five seats on the San Miguel board, thanks to the Government's 27 per cent stake in the expansion-minded food and beverage group.

The point New Zealand dairy farmers should note is that Cojuangco, known in the Philippines as "Boss", is one wily character.

For nearly two decades the Government's anti-corruption body has been interested in his role in soliciting funds from coconut farmers via a so-called coconut levy. Just where and how those funds were used during the Marcos regime is still the subject of investigations.

"The Government's position is that they are public funds acquired through the coconut levy and they should be returned," a spokesman for the Presidential Committee on Good Government told the Sydney Morning Herald this week.

Cojuangco, however, looks to have effectively weakened the Government's power on the San Miguel board by issuing a new tranche of shares which dilute its 27 per cent stake and possibly rid the San Miguel board of one of five seats held by the committee.

The problem for the Philippines Government was it could notafford to take up its allocationof the new share issue.

And while all the domestic and Australasian action is happening, Cojuangco and the Government are also fighting in the courts over San Miguel share ownership - the Government's 27 per cent stake and the 20 per cent owned by entities associated with Cojuangco. Although his ownership rights remain frozen until the court ruling, Cojuangco has retained stock voting rights and remains one active chief executive.

San Miguel is hot for Australian and New Zealand production bases to support its big plans for distribution networks throughout Asia.

"The acquisition of National Foods is an important step towards the realisation of our ambition to expand our presence in beverages and food in selected companies in the Asia- Pacific region," said Cojuangco when announcing San Miguel's A$6.40 bid on Wednesday to trump Fonterra for NF.

San Miguel already owns upmarket Australian brewer James Boag and Sons and 51 per cent of Berri Juices, the company revived by Doug Shears, the brainchild behind the Uncle Toby's food brand.

National Foods is the jewel in the crown of the Australasian dairy sector. This latest bid in the high stakes takeover duel values it at $2.08 billion.

National Foods shares closed at A$6.50 yesterday.

Market opinion in Australia remains evenly split on the eventual winner in this takeover battle. But the hedge funds, now with an estimated 25 per cent stake in National Foods, are milking it for all it's worth.

INTEREST RATE ALARM

The biggest news for markets this week was no news - a further interest rate rise by the Reserve Bank of Australia failed to materialise.

What did emerge, however, was that during last October's federal election the central bank was concerned enough about the Coalition's election tactics to ask the Australian Electoral Commission to investigate.

The issue, of course, was the successful strategy deployed by Prime Minister John Howard to shove interest rates to the front of campaigning.

The Coalition was relentless in its claims that a Labor government would mean higher interest rates for the country.

For big spending, debt-laden Australians, the message hit home. All while an equally uneasy central bank was in the background deeply concerned about the politicisation of rate policy.

Last month Australians got a rate rise anyway and the public's displeasure is now showing in the polls: the Coalition is trailing Labor, according to Newspoll.

As for the Reserve Bank's quiet complaints, they went no where. The electoral commission said it had no remit to stop party election tactics.

* Paul McIntyre is a Sydney journalist