Money or the bag for Fonterra chief

Henry van der Heyden says Fonterra management are all smiles after pulling out of the National Foods takeover Picture / Greg Bowker

Fonterra chairman Henry van der Heyden slept soundly on Monday night.

Just hours earlier he had pulled the plug on a $2 billion bidding war for Australia's National Foods.

But the 47-year-old son of Dutch immigrant dairy farmers says he has spent no time worrying about the decision.

In a giant corporate game of "It's in the Bag", Fonterra played it safe. It took the money.

It sold its 20 per cent National Foods stake to rival bidder San Miguel and walked away with a net profit of more than $250 million - by hokey!

Whether it missed out on the full set of deluxe whiteware or successfully avoided taking home the chocolate fish remains to be seen.

To the outsider it looks as if an audience full of farmers screaming "take the money" was too much for the board of directors to ignore.

"No, no," says an unimpressed van der Heyden, when the Herald runs the Selwyn Toogood analogy past him.

First of all, Fonterra already had a very good idea of what was in the bag, he says. It had done comprehensive due diligence on National Foods.

Secondly, it didn't matter how much shouting the farmers did, it was always going to be a value decision for the board to make.

"Farmer support was not one of the criteria," he says.

After due diligence was completed in early March, the board and management drew a clear line in the sand. Everyone knew exactly where the upper price limit was.

"San Miguel actually made it very easy for us coming in at $6.40.

"There was not even a bit of hesitation about the decision. It is a hell of a price for San Miguel to pay."

So there was no tragic moment where van der Heyden had to tell a downcast management team that the board had snuffed out their takeover ambitions?

"No, we have been through such a good process here. It has been disciplined and professional."

In fact, when the Fonterra board met on Tuesday, National Foods was not even on the agenda, van der Heyden says.

"The deal is done so we're getting on and doing other things."

The whole process was smooth and predictable.

"Nothing that happened came as a great surprise.

"Not that it played out exactly as we expected - because we expected to get National Foods - but the question is: with hindsight would we do anything different? The answer to that is no."

There are plenty of Fonterra critics who will now argue that takeover failure is symptomatic of wider problems with the company's structure.

They argue that to compete properly with the likes of San Miguel, Fonterra - or at least its consumer products business - needs to be listed.

On May 5 farmers will vote on a proposed revamp of Fonterra's capital structure.

But whatever the outcome of that vote, the reforms will be conservative. Fonterra will remain a co-operative.

"Its a nonsense argument," van der Heyden says of the suggestion that Fonterra was hamstrung by its structure.

"We had no issues about funding this deal and we had no issues about executing it."

In the end it just came down to value and price - issues on which any good board would base their decision, he says.

His attitude suggests that Fonterra could have paid more if it wanted to.

"Our balance sheet after National Foods, if it had gone ahead, would have been stronger than it was at the time we were formed."

So why didn't they raise the bid?

Because National Foods was only the preferred option "at the right price", he says.

When it reached a certain price "other alternatives started to look like better value for shareholders".

"We want the strongest market position possible in Australia but there are different options and different paths to get there."

Those paths will include organic growth of Fonterra's existing Aussie operations and new acquisitions.

He is not keen to talk about what other acquisition targets are on the radar.

"I don't want to go into too much detail because you'd soon be able to work it out and that's not in the interests of Fonterra."

It sounds like Fonterra has something up its sleeve because the two most likely targets have already been well flagged by industry commentators. They are:

* Parmalat Australia, a subsidiary of the Italian dairy giant bankrupted in 2003 after a multibillion-dollar fraud.

* New South Wales-based cooperative Dairy Farmers, which has a sizeable consumer products division with strong brands.

Whatever happens, Fonterra is now destined to face Filipino beer brewer San Miguel as a serious competitor in the Asia Pacific region.

Van der Heyden says the company is unconcerned. "We know a lot more about dairy than San Miguel."

In fact van der Heyden seems so upbeat it's hard to believe Fonterra lost the bidding war for National Foods last week.

"Hey, let's not forget we've made A$250 million dollars on this deal," he says. "All around the board and the management team we're smiling."

HENRY VAN DER HEYDEN

* Age: 47

Family

* The son of Dutch immigrant dairy farmers. Married with four adult children.

* One son is a dairy farmer, the other works for PricewaterhouseCoopers. His two daughters are at university studying business management.

Education

* Engineering degree, with honours from Canterbury University, graduated 1980.

Career

* Started dairying as a 50:50 sharemilker before going on to buy his own farm.

* A 1990 meeting with former industry leader Sir James Graham - who was Dairy Board chairman between 1982 and 1989 - started van der Heyden on the political path.

* Graham told van der Heyden that he and his family had got a lot out of dairying and it was time to put something back in.

* His job as chairman of Fonterra now takes up about three and a half days a week.

* He and his wife, Jocelyn, are based in Hamilton but have a dairy farm at Putaruru, in south Waikato.

* Van der Heyden appears to be in for the long haul as head of the Fonterra board.

* "It's a job that I enjoy immensely. I still look forward to getting out of bed every morning to come to work."