Food magnate Hart launches NZ Dairy Foods offer

3.00pm

Entrepreneur Graeme Hart is expanding his global food interests, today announcing a $238 million takeover offer for dairy products company New Zealand Dairy Foods.

Hart's private investment vehicle Rank Group agreed to buy processing giant Fonterra Cooperative Group's controlling 50 per cent stake at $1.70 a share.

The balance of the company is owned by around 6,200 current and former Fonterra farmer shareholders.

Hart, New Zealand's richest man with personal wealth estimated at up to $1 billion, is the main shareholder in Australian food ingredients firm Burns Philp.

"We are significant investors in the food sector... both domestically and globally, and what you see with our purchase of New Zealand Dairy Foods is just a continuing expansion of those interests," Hart told Reuters.

He declined to detail how the acquisition would be financed.

Hart's investment in Burns Philp, which has interests in yeasts, consumer goods, spices and bakery ingredients in around 25 countries, has been a rollercoaster since he invested around $310 million for a 20 per cent stake in 1997.

Hart was pilloried in the media when the share price crashed shortly after from around A$2.30 a share to just 3.4 cents, before he took on the role of deputy chairman and helped engineer a revival in the group's fortunes.

Burns Philp shares, currently about 60 per cent owned by Rank Group, closed on Thursday at A$0.65.

Fonterra, required by legislation to sell its 70 million shares in NZ Dairy Foods following its formation last year, said the Rank offer was good for consumers and provided certainty for NZ Dairy Foods shareholders and employees.

"The $1.70 a share offer is the best available following an exhaustive sales process that canvassed all potential international buyers," Fonterra chief financial officer Graham Stuart said in a statement.

New Zealand's competition regulator last month rejected an application by Australia's National Foods to acquire NZ Dairy Foods.

NZ Dairy Foods has about 40 per cent of the New Zealand dairy market and generates revenues of just under $500 million a year.

Its brands include Anchor, Fernleaf, Chesdale, Fresh 'n' Fruity, Royal Tasman and Ornelle.

NZ Dairy Foods said last year it could look to list on the New Zealand Stock Exchange to give it access to more capital, but Auckland-based Hart said the group would not be floated.

NZ Dairy Foods said it would wait for an independent appraisal report, likely to be near the end of April, before making a recommendation to shareholders.

"While the resolution of NZ Dairy Foods' future ownership has been concluded within a shorter time frame and with less involvement by farmer shareholders than anticipated, the certainty provided by confirmed ownership will be beneficial in allowing the company's management to return to the task of growing and developing the business," it said in a statement.

Fonterra was formed last year by the merger of New Zealand's two largest dairy processors and the export board they controlled.

It is New Zealand's largest company, generating around NZ$14 billion in revenue a year, some 20 per cent of NZ's exports and around seven per cent of GDP.