Hart swipes at Goodman float sceptics

Billionaire Graeme Hart yesterday lashed out at investors sceptical about the prospects for the A$2.55 billion ($2.73 billion) float of his transtasman food giant, Goodman Fielder.

In an exclusive interview with the Business Herald, Hart dismissed as "ill-informed" fund managers and observers who said they would not buy into the offer because Goodman was not a high-growth business.

Hart said Goodman, which owns brands such as Meadow Fresh, Molenberg and Kiwi bacon, would offer an investment proposition that was scarce in New Zealand - secure and stable long-term earnings.

These characteristics should be a staple of most portfolios.

"New Zealand is short on good-quality companies," said Hart, who usually avoids the media. "So when you get the opportunity to have a new company ... that you are familiar with and the key characteristics of it are highly attractive, you have to be careful that you do not squander it."

His criticism came as Goodman's parent, Burns Philp, 54 per cent owned by Hart, disclosed that the public portion of the offer would open today - two days earlier than expected.

The offer for institutions is due to open on Monday, ahead of its float at the end of the year.

Hart said he was speaking out because the market was inadequately informed, but he was confident investors would eventually get the message.

Commentators were reciting a standard line rather than speaking from a position of having done their homework, he said.

In a prospectus launched late last week, Goodman forecast sales to increase from A$2.3 billion in the year to last June to A$2.54 billion in the year to June 2007.

Operating profits would grow from A$322.2 million to A$405.6 million over the same period.

But some fund managers, such as Walker Capital Management, argue that most growth comes from cost cuts and gains from merging disparate businesses.

Goodman Fielder is made up of Burns Philp's baking, spreads and oil businesses and the New Zealand dairy and cured meats business owned by Hart's private company, Rank.

Fund managers also said the failure last week of talks to sell the business to a partnership of private investment firms led by Boston-based Bain Capital and Australia's Pacific Equity Partners raised a red flag.

Private equity firms are usually interested when there is potential for a strong earnings rises.

Hart said Bain and Pacific Equity had agreed to pay A$3.65 billion. As this was exactly the same price that would be achieved with a flotation, it made sense to retain a significant holding to benefit from the potential gains.

Goodman would trade at a multiple of trading profits less than New Zealand's top companies and, as a result, it had to be seen as good value.

"You are going to see short-term capital appreciation simply because the offer price will be set at a discount to where you would expect it to trade.

"And beyond that you are going to have a business that generates strong dividends and good growth with very, very low risk and volatility."

Burns Philp will retain a a minimum 20 per cent of the business, worth A$510 million, and would keep the stake until mid-2007.

Investors should not expect the earnings growth he had delivered in other businesses, said Hart. Most investors were not prepared to take the sort of risks he, Rank and Burns Philp took routinely.

"If you want dotcom growth then take dotcom risk," he said, referring to the recent technology boom.

Hart denied shunning the media.

"It is nothing to do with being shy or reclusive. It is just straight business. We talk when we have something to say."

Goodman fielder

* Transtasman food giant operating the Meadow Fresh and Tararua dairy brands, Vogel's bread and cereals and Kiwi bacon brands.

* Will float on the New Zealand and Australian stock exchanges by the end of the year at a share price between A$1.85 and A$2 a share.

* Expected to have a market value A$2.45 billion to A$2.65 billion.

* Gross proceeds from the offer A$1.72 billion to A$2.12 billion.