Richmond faces new predator

By JIM EAGLES business editor

The already lively battle for New Zealand's largest listed meat company, Richmond, hotted up further yesterday when British meat magnate Bernard Matthews said he would compete against Dunedin-based PPCS for the company.

Mr Matthews, whose interests include the Advanced Foods plant in the Hawkes Bay town of Waipukurau, issued a restricted transfer notice of his intention to acquire 60 per cent of Richmond.

PPCS may also face opposition from the Commerce Commission, which said yesterday it was investigating the proposed PPCS move on Richmond - as well its earlier acquisition of South Island-based Mair Venison - because of concerns about its possible dominance of venison processing in both islands.

That will be just one more hurdle for PPCS, which last year was forced to divest itself of a 36 per cent stake in Richmond after Richmond directors ruled it had breached company rules in acquiring the shares.

However, the immediate battle will be in the sharemarket, where the notice filed by Mr Matthews' subsidiary, North Meats, of Invercargill, nominates a price range of between $2.70 and $3.24 a share, exactly matching the restricted transfer notice earlier filed by PPCS.

North Meats will be able to stand in the market from June 6, putting it behind PPCS in the race for control of Hawkes Bay-based Richmond.

This month, PPCS built up a 16.75 per cent stake in Richmond with the aid of a 10 per cent tranche from New Zealand's richest farmer, Peter Spencer.

Then last week it notified the exchange of its intention to build its holding to 60 per cent.

That provoked an angry reaction from Richmond chairman Sam Robinson, who said it was in contrast to earlier PPCS assurances, and would make trust or cooperation difficult.

Subsequently a sub-committee of three independent directors, set up to formulate a response to the PPCS offer, found that PPCS had inadvertently been in possession of price-sensitive information and ordered it to observe a pause of 15 working days.

PPCS referred that to the Stock Exchange's market surveillance panel, which yesterday ruled that PPCS was not, in fact, in possession of relevant information.

As a result, PPCS will be clear from tomorrow to proceed with its move on Richmond.

That decision was welcomed by PPCS, which had always maintained that the information - contained in "an unsolicited letter written by Richmond's chief executive John Loughlin" - was not price sensitive.

In passing, it delivered a swipe at the Richmond board's handling of the matter and said that the organisation was "most concerned that by their unwarranted actions Richmond might have impeded any transfers."

In response, the Richmond board said it was pleased the issue had been "resolved quickly and definitively."

It also said the company's performance for the year to September 30 was ahead of the half-year forecast of an after-tax profit of $19.4 million.

"We can now advise that trading in April and May is above budget for these two key months and the board now believes Richmond will comfortably better the year-end forecast."

That positive view is echoed in a Forsyth Barr report on Richmond.

It says an offer of around $3 a share would substantially undervalue the company and recommends that investors not accept the PPCS offer.

If Richmond was trading at a similar price/earnings multiple to other rural companies, its share price would be $4.17, the report says.

Meanwhile, two Hawkes Bay deer farmers entered the fray yesterday by expressing concerns to the Commerce Commission that PPCS is heading towards a dominant position in deer processing.

Their lawyer, Peter Ratner, also acted for Richhold, a company formed by Hawkes Bay farmers to fight off PPCS's previous bid for Richmond.

He said the recent PPCS acquisition of Mair had already given it 70 per cent of the South Island market and 25 per cent in the North Island.

If it acquired Richmond, Mr Ratner said, PPCS's share of the North Island deer market would be 75 per cent, which "would seem to run into the new Commerce Act's definition of mergers which severely restrict competition."

A commission spokesman said the Mair takeover had been under investigation for some time "and we are now also talking to PPCS about Richmond."