Gaffe puts Fonterra in a tizz

By LIAM DANN and GARETH VAUGHAN


Fonterra yesterday went into damage control over an apparent blunder by its chief executive, Andrew Ferrier, in the dairy giant's $1.5 billion bid for Australia's National Foods.

The co-operative was forced to clarify Ferrier's reported statement that Fonterra would not lift its bid for National Foods.

A source said the comments attributed to Ferrier could have been interpreted by the Australian Takeovers Panel as full and final, running the risk of legally preventing Fonterra from raising its bid in the future should it want to.

Ferrier told the Dominion Post newspaper at a Wellington Chamber of Commerce lunch that the co-operative "would not budge".

Talk of a higher offer has boosted National Foods shares as high as A$5.76. Yesterday they closed down 2c at A$5.74.

Fonterra said Ferrier's comments at the lunch had been "misinterpreted' and reiterated that the present offer was generous, but a spokesman would add nothing to the statement.

The source suggested the latest statement should be read as preserving the co-operative's ability to raise the bid rather than suggesting such a move was imminent.

In the statement, Fonterra said it did not intend to limit any of its options. "We reserve our right to vary any terms of the offer if that were something we wished to do."

National Foods' board has rejected Fonterra's bid as too low.

At its annual meeting in Sydney, a largely grey-haired gathering of about 300 small shareholders made it extremely clear they were not only unimpressed with Fonterra's offer but did not want to see National Foods, Australia's largest listed dairy company, owned by foreigners.

Several shareholders rose to say they would not be "seduced" by the bid. "Short term capital gain: I don't want it," shouted one long-term shareholder, earning himself a round of applause. Retail investors hold between 35 and 40 per cent of National Foods' shares.

Stephen Matthews, deputy chairman of the Australian Shareholders Association, said the parochial reaction of small shareholders suggested Fonterra was going to struggle to reach its preferred goal of 100 per cent ownership.

He said there was a lot of strong feeling about foreign takeovers of Australian companies.

Several dairy farmer shareholders addressed the crowd saying they were concerned about how Fonterra would treat Australian milk suppliers.

National Foods managing director Peter Margin presented the meeting with details of his company's strategy, including plans for a merger with canned fruit firm SPC Ardmona.

National Foods recognised it needed scale if it was going to compete with world rivals, he said.

It had decided about 12 months ago to focus on product category growth rather than geographic growth. Fonterra's displeasure with that move away from the dairy sector prompted it to make the surprise takeover bid.

Margin said the premium - of about 20 per cent - Fonterra was offering over the pre-bid share price was low by standards of other Australian takeovers. Average premiums for similar offers ranged from 25 to 35 per cent. Asked whether he would accept a Fonterra bid if it was raised to a 35 per cent premium, Margin refused to comment.

Analysts say anything less than 100 per cent control would not allow Fonterra to extract the synergies it needed from the merger.