Fonterra sticking with its offer price

Fonterra yesterday dismissed the growth forecasts issued by its Australian takeover target National Foods as being too optimistic.

Fonterra chief executive Andrew Ferrier said National Foods had done a good job in the past, but companies such as Coca Cola Amatil and Parmalat were becoming increasingly competitive.

He was responding to claims by National Foods that its shares were worth between $A6.11 ($6.50) and $A6.65 per share, well above Fonterra's offer of A$5.45.

National Foods shares yesterday closed up A4c to A$5.92.

Ferrier said in the competitive Australian market growth would be difficult for anyone to achieve and would require significant investment.

"National Foods does not appear to have forecast significant increased spending to drive growth, to fund innovation or to bring costs down."

The attack came amid talk of a counter-bid for National Foods and a growing belief among investors that Fonterra will have to raise its offer.

It also came a day ahead of Fonterra disclosing its plans to ensure it continues to attract and retain the capital necessary to grow.

Ferrier attacked National Foods' decision not to provide an independent expert analysis of Fonterra's $1.5 billion bid.

"We simply do not accept that an independent expert could not get up to speed in time.

"It is acknowledged market best practice to use independent experts, especially where valuation is key."

Ferrier said the valuation provided by directors of National Foods was aggressive and extremely high.

"Whether you look at past trading ranges, comparable companies, other similar acquisitions, broker target prices pre-bid or current broker valuations, National Foods directors' valuation is off the charts."

While National Foods would give Fonterra a stake in the Australian chilled milk market and the yoghurt segment there were other ways Fonterra could take a position in those markets.

"There are other opportunities both within and outside Australia and we are always evaluating those opportunities.

"We have put forward a fully-priced offer that fairly values the business. At our offer price, this acquisition makes sense.

"We are very clear that at another price, it may not make as much sense and other options may start to look more attractive."

Earlier he said that the rise in the National Foods share price was driven by speculators.

The bid was due to expire on December 21, but Ferrier said Fonterra was looking at extending it.

"We have no expectation of having any acceptances, but we do think that when we get to a deadline period of time people will start to think quite clearly of what their options are," he said.

* Competition watchdog, the Commerce Commission, yesterday cleared the way for Fonterra to acquire 100 per cent of National Foods.