Dairy Foods may be split

Graeme Hart is considering plans to split up his New Zealand Dairy Foods business as bidders look to address potential Commerce Commission hurdles.

An industry source says bidders for Dairy Foods are investigating the possibility of the milk and yoghurt divisions being sold off separately.

Hart is believed to have placed a value of $1 billion on Dairy Foods (including debt).

The talk of a break-up follows speculation in Australia that the sale process had stalled with two key bidders - including Filipino brewer San Miguel - pulling out.

The source said yesterday that was not the case. The sale process remained on track with five bidders having now submitted proposals to Hart's team.

Those bidders included San Miguel - which last week won a $2 billion bidding war with Fonterra for Australian dairy company National Foods - along with European dairy giants Danone and Nestle.

It is still unclear who the other two bidders are but it is understood that they are also large corporations in the fast-moving consumer goods sector.

The source said the process was likely to be completed within two weeks. San Miguel had been tipped as front runner in the bidding for Dairy Foods prior Fonterra pulling out of the National Foods battle.

San Miguel is likely to hit competition hurdles in New Zealand if it also buys Dairy Foods because National Foods owns the licence to the Yoplait yoghurt brand. That combined with Dairy Foods' Fresh 'n Fruity and Swiss Maid brands could be too much for the commission to bear.

National Foods tried to buy Dairy Foods back in 2002, when it was being sold off by Fonterra, but was warned off by the commission.

 

Last month, San Miguel confirmed to the Filipino stock exchange that it was investigating the purchase of Dairy Foods.

It has since said its primary focus is the completion of the National Foods takeover - which closes April 29 - and that it will not make any moves in New Zealand that could jeopardise that.

A sale process in which San Miguel bought Dairy Foods' milk and beverage business, with the yoghurt and dairy dessert business going to a Nestle or Danone could, ultimately, suit all parties.

Dairy Foods employed 900 people in 2002 but that number is likely to have fallen as Hart has restructured the business.

* AAP reports that ratings agency Standard & Poor's yesterday raised the status of Hart's Australasian food business Burns Philp to BB-minus from B-plus. S&P said the outlook was stable for the firm - which is 54 per cent owned by Hart. The upgrade was due to an improved underlying financial performance for the second half of 2004, as well as debt reduction and improved liquidity.

Hart of the matter

* Graeme Hart is trying to sell New Zealand Dairy Foods.
* Bidders include San Miguel, Danone, Nestle and two unknown companies.
* Dairy Foods owns the Fresh 'n Fruity and Swiss Maid brands. It also owns the Anchor milk brand in New Zealand.
* It has a milk factory and a cultured foods factory - both based at Takanini in south Auckland. It also has a milk factory in Christchurch and a specialty cheese factory at Puhoi north of Auckland.