Hart set to make $240m in 2 months

Billionaire Graeme Hart looks set to pocket as much as $240 million in gross profit selling the assets he bought in August from Fonterra.

Details of Hart's gain are disclosed in draft prospectus documents for the A$2.27 billion float of transtasman food giant Goodman Fielder, which is taking over the former Fonterra assets.

They show Hart is selling his New Zealand food operations for A$782.6 million ($850 million) to Burns Philp. Burns Philp, 54 per cent owned by Hart, will combine these assets with its baking, spreads and oils business to create Goodman Fielder, which will be floated on the New Zealand and Australian stock exchanges.

Based on an analysis of divisional earnings, the price is made up of around $654.5 million for the former Fonterra assets. Hart bought the assets for the equivalent $416 million at the end of August. The remainder of the $850 million is made up of Hart's own dairy operations including Puhoi cheese.

Before this latest deal Hart was worth $2 billion, according to the National Business Review's The Rich List. He will make much of the gain by cutting costs, which come at some expense.

The gain will represent a return of almost 60 per cent in just over three months and is certain to raise questions about Fonterra's deal-making skills and its management of the Meadow Fresh operations.

The deal will be the second time Hart has got the better of Fonterra. In 2002, it sold a half share in New Zealand Dairy Foods to Hart in a deal which valued the whole business at $310 million.

Fonterra in August bought back most of the assets, including the Anchor Milk and Fresh n' Fruity yoghurt brands, it had sold to Hart for the equivalent of $754 million. It paid with $338 million in cash and contributed the Meadow Fresh assets then valued at $416 million.

The Meadow Fresh assets are now being sold into the new Goodman Fielder.

Fonterra said it was comfortable with the latest transaction, which had been independently examined. It said the analysis did not take into the strategic benefits of the assets it gained.

Burns Philp yesterday declined to comment on why it was paying such a price for the businesses. But it understood its purchase will also be examined by an independent appraiser.

Goodman Fielder

* Chief executive Peter Margin.
* Brands: Molenberg, Vogel's, Ernest Adams, Edmonds, MeadowLea, Meadow Fresh, Tararua, Puhoi, Kiwi, Huttons.
* Due to float on the NZX and ASX by December with a minimum of A$1.6 billion offered to the public.
* Expected total share value A$2.27 billion.
* 2006 Sales A$2.46 billion; 2006 Operating Profit: A$355.6 million.