Parmalat collapse spur for a reshuffle

Speculation is growing that the collapse of Italian food giant Parmalat could trigger a long-expected Australasian dairy reshuffle.

The talk was sparked by a statement from Australia's Dairy Farmers that it would consider selling its 9.2 per cent stake in National Foods to pay for an acquisition such as the local unit of Parmalat.

Dairy Farmers owns 27.2 million National Foods shares which are worth about $135 million.

"There are two reasons we wouldn't continue to hold that stake" in National Foods," a Dairy Farmers spokesman explained.

"One would be that if we did want to purchase Parmalat Australia, we could use that as a source of funding.

"The second is that if it's no longer needed - if rationalisation of the dairy processing sector has occurred."

New Zealand's Fonterra has made no comment, but it is involved at least to the extent that, like Dairy Farmers and Paris-based Groupe Danone, it has a stake in National Foods.

Italian police have dramatically widened the investigation into Parmalat - which appears unable to account for $15 billion - by arresting seven people connected with the company on suspicion of fraud.

Among those said to have been picked up were two former Parmalat chief financial officers and the chairman of the Italian affiliate of global auditor Grant Thornton.

As the investigation continues, turnaround expert Enrico Bondi, appointed to run the company two weeks ago when the scandal broke, is expected to ask banks for fresh loans to keep the business going.

Italian newspapers have said Italy's biggest food firm, known globally for its long-life cartons of milk, might seek $154.84 million to keep running.

Parmalat's founder and former chairman, Calisto Tanzi, was detained on Saturday and questioned for three days as prosecutors tried to sort out what US regulators have called one of the "most brazen corporate financial frauds in history".

Tanzi, who built Parmalat into a global food conglomerate employing 35,000 people, told prosecutors there was a €8 billion ($15.3 billion) hole in Parmalat's books, largely in the form of fraudulent bank accounts with non-existent cash.

He has also admitted diverting about €500 million ($961 million) from the publicly listed company into firms owned by his family.

"He knew nothing about finances," explained his lawyer Fabio Belloni.

"He is an entrepreneur. There are many things that he knew nothing about."

An official from the US Securities and Exchange Commission, which wants heavy fines levied on the company for misleading investors, met Italian prosecutors in Milan during the week.

Parmalat's shares, now virtually worthless, have been suspended from trading, and its bonds - many in the hands of small investors - are worth less than one-fifth their face value.

- AGENCIES