By LIAM DANN
Fonterra's chances of success in its $1.5 billion bid for National Foods got a boost yesterday as the Australian takeover target disclosed it had suspended merger talks with canned food company SPC Ardmona.
It was Fonterra's disapproval of the SPC merger that prompted it to make its takeover bid
last month.
Even if the bid is unsuccessful, Fonterra - the largest stakeholder in National Foods with 19 per cent - may now have achieved its goal of preventing the merger.
SPC shares have been placed on a trading halt until tomorrow, pending another announcement. This has prompted speculation in Australia that the company may have begun talks with another potential merger partner.
Fonterra management was not commenting yesterday but will certainly interpret the announcement as a victory as it prepares to formally launch the bid later this month.
Shortly after National Foods released its statement to the ASX yesterday, its shares dropped 11c - they later bounced back to close at A$5.76, down 8Ac for the day.
Australian analysts said the removal of SPC from the picture made things clearer for shareholders who have to make a decision about Fonterra's offer of A$5.45 per share.
Fonterra has said that its offer is conditional on National Foods not making any deal with SPC.
New National Foods chairman David Crawford told a shareholder meeting in Melbourne that, while the board still supported the rationale for the SPC merger, "satisfactory merger terms, due diligence and documentation still remain substantially incomplete."
Crawford reiterated his board's rejection of Fonterra's bid but said the board was committed to giving shareholders time to consider it before moving on with the SPC talks.
National Foods managing director Peter Margin denied it was a victory for Fonterra.
Small shareholders at the National Foods AGM in Sydney last week and at the Melbourne meeting expressed strong support for the SPC merger as a way to block Fonterra.
Margin has consistently said that board opposition to the bid is because Fonterra is not offering shareholders enough money.
