Valuation puts heat on Goodman bid for Adams

Food group to decide today whether to increase offer for baker, reports GEOFF SENESCALL.


Goodman Fielder will decide today if it will sweeten its $37.95 million takeover offer for Ernest Adams after falling $825,000 shy of reaching a valuation range.

With tacit support of owners of nearly 80 per cent of the shares, it will be a touch and go decision for Goodman Fielder. Goodman Fielder needs 90 per cent acceptance to invoke compulsory purchase provisions to complete the takeover.

An appraisal report by merchant bankers Grant Samuel valued the Christchurch baker at between $38.8 million (235c a share) and $43.8 million (265c).

It concluded that the Australasian food group's offer was not fair, although Grant Samuel did add that it expected Ernest Adams' shares would fall below this range in the absence of a takeover offer.

Ernest Adams' chairman Michael O'Neill, who had strongly opposed the Goodman bid, advised shareholders not to sell. This message was plastered over the front of the appraisal report, which also contained lengthy statements from directors ahead of Grant Samuel's analysis.

The valuation flies in the face of the view of the majority of shareholders who - frustrated by years of poor performances - believed the Goodman offer was fair.

Last night Tower Corporation, which controls 60 per cent of the shares, declined to comment. However, Tower has already granted an option to Goodman over 19.9 per cent of its stake. Ideally Tower would like to exit its position ahead of listing late next month.

Mr O'Neill said Ernest Adam's performance had been "unsatisfactory" over the last four years. "Restructuring unfortunately has taken longer and been more expensive than originally planned," he said. But Ernest Adams had turned the corner.

"The first four months of this financial year show all the key performance indicators tracking strongly in the right direction.

"Our sales have continued to rise and are maintaining consistent growth. Manufacturing costs have been significantly reduced, so our margins are now making a strong contribution to a much healthier earnings position.

"We are also seeking to quit in excess of $3 million worth or surplus assets.

"We are able to tell our shareholders today that the company has established a stable platform to achieve a return to profitability, positive cash flow and restoration of shareholder value this financial year."