Fonterra zeroes on control of Aussie rival

By LIAM DANN


Fonterra has launched an aggressive $1.5 billion takeover bid for Australia's largest listed dairy company.

If it is successful the bid - for 100 per cent of National Foods - will make Fonterra the largest player in Australia.

Already New Zealand's biggest company and the world's largest exporter of dairy ingredients, Fonterra has been under pressure to consolidate its position in Australia since it was founded in 2001.

Industry analysts say it needs to be the number one player in its home market of Australasia before it attempts large-scale expansion in the rest of the world.

Fonterra is already the biggest shareholder in National Foods, with a stake of about 17 per cent, and owns substantial stakes in several other Australian dairy companies.

The A$1.34 billion ($1.5 billion) bid excludes the stake Fonterra already owns, and values the Australian company at A$1.62 billion.

Fonterra chairman Henry van der Heyden said early discussions with the Australian competition watchdog indicated the takeover would not fall foul of issues which saw a Qantas/Air New Zealand merger scuppered this year.

A few issues had to be worked through on both sides of the Tasman and it was possible Fonterra might have to sell the fresh milk division of a firm it owns in Western Australia.

Fonterra first considered a plan for a full takeover 18 months ago. But it was concern about the strategic direction that National Foods was taking that prompted it to move now, said Fonterra's director of strategy and growth, Graham Stuart.

National Foods began merger talks with the Australian canned foods company SPC this month.

Fonterra does not want National Foods to stray from its core dairy business.

National Foods rejected Fonterra's bid yesterday, saying the offer of A$5.45 a share was too low.

Ultimately shareholders will decide the fate of the bid, expected to close in mid-December.

Fonterra needs about 22 per cent of shareholders to accept to take a controlling 50 per cent stake. No single shareholder is big enough to block it.

But Australian shareholders yesterday appeared to be expecting that Fonterra would have to increase its offer.

The National Foods share price soared nearly A$1 to close 14Ac above the offer price.

New Zealand dairy farmers support the bid. Dairy Farmers of New Zealand chairman Kevin Wooding said the move was bold and positive.

Big deals

$754 million: Fletcher Building for Australian wallboards manufacturer Laminex in 2002.

$2.2 billion: Telecom for Australian carrier AAPT in 2002.

$260 million: Fletcher Building for Tasman Building last year.

$2.2 billion: Graeme Hart's Australian food company Burns Philp for Goodman Fielder last year.