Fonterra mulls on raising bid

Dairy giant Fonterra has moved a step closer to boosting its offer for Australia's National Foods.

It confirmed yesterday that it had asked and been granted access to National Foods' books, allowing it to better assess the company's worth.

It is mulling a new bid above the A$5.45 ($6.02)-a-share offer it lodged last year to trump a rival A$6-a-share bid by Philippines brewer San Miguel.

Fonterra chief executive Andrew Ferrier said: "We need a more detailed understanding of various aspects of National Foods' business.

"We are taking the necessary time to fully research these matters so we can be comfortable that we are making decisions that create value for our shareholders."

National Foods' shares yesterday rose 4Ac in Australia to A$6.30.

Analysts say Fonterra, which generates some 20 per cent of New Zealand's exports and 7 per cent of gross domestic product, will have to pay at least A$6.17 a share if it is to prevail.

This would lift its bid to A$1.83 billion, but as the co-operative already has a 20 per cent stake in National Foods, it is only faced with a cash cost of $1.5 billion.

Fonterra's offer closes on February 15. But if it is to bid more, Australian takeover rules require it to amend its offer by next Tuesday.

It can afford to pay more than San Miguel because it can get greater savings by merging its dairy operations with National Foods, maker of Pura milk and Yoplait yoghurt.

San Miguel's Australian operations, Tasmanian brewer J Boag & Son and a 50 per cent stake in fruit juice maker Berri, have little in common with National Foods.

Neither San Miguel nor Fonterra has disclosed the savings they expect.

National Foods has valued itself at between A$6.11 and A$6.65 a share.

It said: "The provision of the information to Fonterra might or might not result in Fonterra revising the terms of its offer."

Fonterra, which makes Mainland cheese and Anchor butter, wants a bigger slice of the A$11 billion dairy market in Australia, where it claims about 14 per cent of dairy sales.

Its 12,000-plus farmer shareholders are nervous about the takeover bid. Some doubt the wisdom of investing heavily in consumer products - an area where it has had less than stunning success. They believe Fonterra should stick to what it does best, producing cheap commodities.

But others share management's view that the co-operative must make a success in consumer products to soften the effects of the often wild swings in commodity cycles.

Meanwhile, San Miguel, the largest publicly listed food beverage and packaging company in the Philippines, formally launched its takeover bid late on Tuesday.

It has the National Foods board's backing to expand its brands in the Asia-Pacific region. If it loses to Fonterra, National Foods must pay it a A$17 million break fee.