San Miguel nudges Fonterra to sell stake

San Miguel has declared its $2 billion bid for Australia's National Foods unconditional, in a bid to force Fonterra to sell its stake.

Fonterra pulled out of a bidding war for National Foods last month and agreed to sell its 19.9 per cent stake to San Miguel if the Philippine brewer's bid went unconditional.

San Miguel had said a 50 per cent stake was a condition of its bid.

But yesterday, San Miguel waived that condition.

After nearly six weeks as the sole bidder, it has managed to collect just 36 per cent of National Foods' shares.

That has prompted speculation in Australia that the bid had stalled in a "chicken-and-egg" situation - institutional shareholders were waiting for Fonterra to sell and Fonterra was holding out for the 50 per cent threshold, which could not be reached until the institutions sold.

There was talk that San Miguel might have to sweeten its bid.

Last night, San Miguel appeared confident it had found a way to avoid that. "Fonterra would now be expected to sell its stake," a San Miguel spokesperson said.

The wording of Fonterra's statement last month did not refer to a 50 per cent threshold - only to the bid becoming unconditional.

But Fonterra was not about to commit itself to anything. "We are considering our position," said director of strategy Graham Stuart.

Last week, Fonterra chief executive Andrew Ferrier said he was well aware of the situation and that it was best to be prepared for whatever "curveball" might come along.

San Miguel has offered A$6.40 a share and would have more than 55 per cent of National Foods if it gets Fonterra's stake.

Fonterra is expected to walk away from the sale with a profit of about A$250 million ($267 million).

San Miguel made its initial offer in December. The bid is due to close on June 10 after it was extended last week.

Meanwhile, San Miguel said it was still considering buying Graeme Hart's New Zealand Dairy Foods (NZDF).

Hart's Rank Group confirmed last month that it was sounding out potential buyers for NZDF - New Zealand's second largest dairy company after Fonterra, worth an estimated $1 billion, including debt.

However, if San Miguel buys National Foods it may strike a Commerce Commission roadblock with NZDF. In 2002, the commission rejected National Foods' bid to buy NZDF on the grounds it would significantly lessen competition in the yoghurt and dairy dessert market.

San Miguel has said it will use US$1.85 billion in loans and proceeds from a recent 18 billion peso ($468.5 million) stock rights offer to acquire National Foods.

The group's chief finance officer, Ferdinand Constantino, said San Miguel would pursue its NZDF bid after it completed its purchase of National Foods.

The company - whose operations make up 3.4 per cent of the Philippines' gross domestic product - is looking overseas after dominating its home market in beer, soft drinks, liquor, processed food, dairy and poultry.