Rival bid blocks Fonterra takeover

Fonterra's hostile bid for Australia's National Foods hangs in the balance after a rival friendly takeover offer from Philippines soft drink and beer giant San Miguel.

National Foods said late yesterday that it was recommending shareholders accept San Miguel's offer to buy all shares at A$6 ($6.51) each for a total of A$1.78 billion - outbidding Fonterra's $1.62 billion, or A$5.45 a share, offer.

Analysts say Fonterra appears to have been scuppered as the new bid is likely to succeed, unless Fonterra lifts its offer - something Fonterra boss Andrew Ferrier did not rule out earlier this month.

He is overseas until early in the new year and company chairman Henry van der Heyden could not be contacted for comment yesterday.

A Fonterra spokesman said the company had noted the rival offer, was considering its content and would respond in due course.

He would not be drawn on any possible timeframe but pointed out the offer said "that the bidder's statement is to be lodged within a month".

But the analysts, who did not want to be named, said Fonterra's position looked tenuous.

"I think A$6 will get it," one said. "The National Food share price [which rose to A$5.96 on the news] reflects that - its indicates that the market thinks the bid is at the right price," he said.

But David Spy, head of research at FW Holst & Co in Melbourne, said Fonterra could afford to up its offer.

"[They] can afford to go higher and they can get more cost savings out of National Foods than San Miguel," he said. "It will certainly show us just how much Fonterra wants it."

Speculation about a possible San Miguel bid for National Foods emerged early this month after the Philippines-based company launched a rights issue to raise about A$323 million.

The new offer leaves Fonterra with three options - sell its existing 19 per cent stake to the Philippines conglomerate, raise its own takeover offer price or keep its National Foods stake and accept life as a minority shareholder.

"But being locked in as a minority isn't really a great place to be," an analyst said.

Australian rules mirror local ones, whereby a 10 per cent holding is enough to block compulsory acquisition by any 90 per cent shareholder.

National Foods chairman David Crawford said San Miguel's offer represented a premium of 28.5 per cent to the closing share price before the Fonterra bid.

He said the offer was within 2 per cent of the National Food board's valuation range of A$6.11 to A$6.65 a share, excluding the value of the franking credits accompanying the interim dividend.

National Foods chief executive Peter Margin said he did not believe Fonterra's 19 per cent stake would be an obstacle for San Miguel.

San Miguel already has interests in Australia through its 50 per cent ownership of the fruit juice-maker, Berri.