Gaynor: It's time to sell to Danone

By BRIAN GAYNOR

Frucor shareholders are running out of time to decide on Danone's $2.35 a share offer.

The bid closes at 5 pm on Friday and cannot be extended.

Shareholders who do not accept by the end of the week will miss out unless Danone reaches 90 per cent and moves to compulsory acquisition.

The takeover battle took a dramatic turn last week when Grant Samuel reduced its assessed value of the company by between 15c and 16c a share from $2.53-$2.96 to $2.38-$2.80.

This followed a review by management of its long-term forecasts for Australia.

The analysis concluded that operating costs in Australia would increase by $500,000 to $1 million a year. Long-term earnings forecasts for Australia were revised marginally downwards. Management also expects slightly higher losses from the UK and the rest of the world this year.

Downward forecast revisions are a common occurrence at Frucor.

The company's independent directors believe the Danone offer is not fair, but are advising shareholders to accept.

The directors also said they would be accepting in respect of their own shareholdings.

The offer has three possible outcomes:

* Danone reaches 90 per cent and moves to compulsory acquisition.

* It obtains between 50 per cent and 90 per cent, waives its 90 per cent acceptance condition and Frucor remains listed.

* It receives acceptances for less than 90 per cent, does not waive the 90 per cent condition and all shares are returned to shareholders.

Because Frucor's share price is expected to fall below $2 if the company remains listed, the most sensible option for most shareholders is to accept Danone's offer and buy back at a lower price if the second scenario eventuates.OTTER GOLD MINES The quick capitulation of Otter shareholders, particularly Guinness Peat Group, to Normandy NFM's takeover offer has been a surprise.

It is a big embarrassment to Sir Ron Brierley and GPG's Tony Gibbs after a 10-year conflict with Tony Radford and his group of companies.

In the early 1990s, GPG tried to unwind the complex cross-shareholdings between United Resources, Gold Resources, Mineral Resources (now Otter) and NZOG, a group of companies controlled by Mr Radford.

Although GPG had substantial shareholdings in Gold Resources and United Resources, Sir Ron tried and failed nine times to have Mr Gibbs appointed to one of the boards.

He threatened legal action and complained to the Securities Commission, but was forced to walk away with a profit of between $6 million and $7 million.

In August 1999, GPG re-entered the fray when it bought a 19.9 per cent shareholding in Otter for $7.5 million, or 73c a share.

Mr Radford disqualified GPG from voting on his re-election at the November annual meeting, but his position had become untenable and he was forced to resign a month later.

Mr Gibbs was finally appointed to the Otter board in February 2000. GPG had effective control of Otter and was in a position to extract the shareholder value it had been talking about since the early 1990s.

In October 2000, Otter had a two-for-five rights issue at 39c a share that was underwritten by GPG. There was a huge shortfall and GPG ended up with 43.6 per cent of the company at a total cost of $17.7 million, or 49c a share.

Otter quickly turned to custard, and when Normandy NFM announced its offer in October, GPG immediately sold 9.3 per cent and has since sold its remaining 34.3 per cent.

Mr Gibbs resigned as a director at the end of December.

Normandy NFM's offer of 1.9 shares for every 100 Otter shares values GPG's holding at $8.8 million, 50 per cent below its purchase price.

GPG lost the corporate control battle in the early 1990s but made a profit of between $6 million and $7 million.

The investment company finally won the corporate war in 1999/2000 but is down $9 million on its Otter investment.

Sir Ron and Mr Gibbs have ended their obsession with Mr Radford's group of companies, but this has had unfortunate consequences for other shareholders.

It has enabled Normandy NFM to quickly gain a controlling stake when there are strong grounds to suggest that the bid is undervalued.

In a recent Australian report, Grant Samuel valued the Martha mine operation in Waihi, which is 33 per cent owned by Otter, at between $250 million and $300 million.

The independent appraisal report for the Otter acquisition, prepared by Stanton Partners of Perth, values the same assets between $119 million and $149 million.

If the mid-point of the Grant Samuel value is taken into account instead of the same position in the Stanton assessment, Otter's value rises from 32c to 91c a share.

GPG should have offered some resistance to the Normandy NFM offer, but Sir Ron and Mr Gibbs have been battered and bruised by Mr Radford's group of companies and didn't have the stomach to fight another round.

TIGER WOODS

Tiger Woods made a big splash at the New Zealand Open last week - but the world's best golfer has a huge impact no matter where he goes.

An auction at a charity dinner for the Steve Williams Foundation raised $82,100 in Wellington.

With Woods in attendance one fan bid $30,000 for a golf club signed by the superstar and another paid $20,000 for a round of golf with Michael Campbell.

A West Auckland supermarket owner also created a fuss when he paid $75,000 to play with Woods at the Paraparaumu Pro-Am.

But these figures pale into insignificance when compared with a similar event at an Invitation Pro-Am in Ireland in July 2000, which was also attended by Woods.

The auction in Adare, a village outside Limerick, raised £IR11.6 million ($30.6 million) for local charities.

An English businessman paid £IR1.4 million for a round of golf with Tiger and Mark O'Meara, the wife of a Swiss-based Irish businessman paid the same for a portrait of the late Payne Stewart and one fanatic spent £IR1 million on a Pebble Beach US Open flag.

Other amazing prices paid at the auction included a stud fee ($2.9 million), a Jack Yeats' painting ($4 million), a visit to Manchester United at Old Trafford ($660,000) and the bowler worn by the starter of the 1993 Grand National that didn't happen ($26,000).

Irish businessmen must have lost all sense of value after 10 years of prosperity, imbibed too much of the black stuff in Adare or completely succumbed to Tigermania.

* bgaynor@xtra.co.nz