Hart raid on Aussie giant

By PHILIPPA STEVENSON

Like a kiwi jumping a kangaroo, New Zealand billionaire Graeme Hart is attempting a hostile takeover of Australia's largest food company, Goodman Fielder, a vastly bigger business than his own.

If Hart pulls off the audacious deal for the $1.9 billion company - which, ironically, originated on this side of the Tasman - New Zealand's richest man will have a pantry and fridge chock-full of our favourite food brands such as Bluebird, Edmonds, Irvines, Uncle Tobys and Chesdale.

Goodman Fielder combined with Hart's other companies, Sydney-based Burns Philp and Auckland-based NZ Dairy Foods, would have more than $5 billion turnover, 18,000 staff and be among the world's top 80 food businesses - though with a disparate mix of products.

It would rank alongside Australia's Foster's Group and Ireland's Kerry Group, but well below our biggest company, Fonterra, which, with $12 billion revenue, is about 50 places higher.

If successful, Hart will write another chapter in his rags-to-riches story, which began with him leaving school at 16 to be a panelbeater.

He made his fortune buying the Government Printing Office for a knockdown $32 million, added Whitcoulls for $71 million and, by the time he sold out to Blue Star stationery in 1997, was estimated to be worth $302 million.

Instead of resting on his laurels, Hart then risked the lot on Burns Philp, a former South Seas trader fallen on hard times, which in the past three years he has gradually transformed from sharemarket dog to analysts' darling.

In May, he added to his stable when he bought Dairy Foods - which had to be sold off as part of the process of creating Fonterra - for a bargain $245 million from its 6500 farmer shareholders.

The company is New Zealand's major supplier of milk under the Anchor brand, with 44 per cent of the national market, and has other well-known dairy products such as Fresh 'n' Fruity, Fernleaf and Chesdale.

Hart's latest foray started with a surprise raid across the Tasman on Thursday night.

Burns Philp - with a market capitalisation of $482 million worth about a quarter of its quarry - spent $360 million to buy 15 per cent of Goodman Fielder to become the food company's biggest shareholder.

Goodman Fielder, with more than 12,000 Kiwi shareholders, produces many of Australia and New Zealand's most popular consumer brands as well as a wide range of commercial ingredients.

Its turnover in the year to June was $3.2 billion (A$2.9 billion), of which the New Zealand arm contributed $567 million (A$511.4 million) with top-selling brands including Quality Bakers, Bluebird, Ernest Adams, Irvines, Edmonds, Diamond, Champion, Uncle Tobys and Meadow Lea.

The reason for the raid became apparent yesterday morning when trading was halted in Goodman Fielder shares on the Australian Stock Exchange after Burns Philp announced a full and hostile takeover.

Goodman Fielder chief executive Tom Park said the offer had not been invited and advised shareholders to do nothing until receiving advice from directors.

Burns Philp managing director Tom Degnan said the conditional, off-market, cash bid of A$1.85 ($2.05) a share represented a "significant premium" for the baker and snack maker.

The bid values Goodman Fielder at A$2.1 billion ($2.32 billion).

The offer is subject to some unusually strict accounting conditions requiring the Goodman Fielder directors to confirm that the accounts for the past three years accurately reflect the position of the company.

Goodman Fielder shares closed in Australia on Thursday at A$1.49 ($1.65) but analysts maintain the company's weakness is short-term - because of recent rises in input costs such as wheat and oil - and the stock is more likely to be worth between A$1.90 ($2.10) and A$2.10 ($2.32) a share.

There was no halt to trading in Goodman Fielder shares in New Zealand, and the market signalled its view with shares jumping 41c to close at $2.06.

But the fact that the bid seems low does not mean it can be disregarded. Throughout his career Hart has shown an ability to extract bargains from even the toughest negotiators.

Degnan said Burns Philp would fund the bid from cash reserves - currently standing at $852 million (A$770 million) - new debt and equity from the exercise of options.

Credit Suisse First Boston and other financiers were providing underwritten debt finance.

In addition, he revealed that Hart had exercised options in Burns Philp to raise $55 million (A$50 million) to boost the company's cash reserves.

Degnan said the bid for Goodman Fielder continued the Burns Philp strategy to expand the business with a mix of ingredient and consumer branded products.

As part of that exercise, he said, Burns Philp was also considering buying Dairy Foods to bring it under the Burns Philp consumer group.

Hart's vehicle for the offer, century-old Burns Philp - whose consumer foods division was sold to Goodman Fielder in 1997 - is these days a global yeast and natural food ingredients manufacturer with 4600 staff operating in about 20 countries. Its products include yeasts, bakery ingredients and herbs and spices.

Its revenue for the year to June was $1.4 billion (A$1.3 billion), and net assets are $533.2 million (A$479.5 million).

If Hart acquires control of Goodman Fielder, it would be full circle for the company, which has its roots deep in New Zealand, having been created in 1986 from the merging of food companies owned by New Zealand and Australian families.

The driving force in its establishment, Sir Pat Goodman, began his business life working with his father in Quality Bakers when it was a small company in Motueka.

The growing miller and baker was renamed the Goodman Group, and in 1986 it merged with two Australian companies - Fielder Gillespie Davis, dating from 1909, and Allied Mills - to form Goodman Fielder.

The following year the company bought Wattie Industries, adding the Wattie name to its title.

However, Goodman Fielder Wattie failed to meet market expectations, sold Wattie to H.J. Heinz in 1992, and gradually became more of an Australian company.

But it still has significant New Zealand assets and Sir Dryden Spring, a former Dairy Board chairman, has been on the Goodman Fielder board since 1989 and has been deputy chairman since April 2000.