Richard Inder: Hart tries to make Dairy Foods palatable

SHAKY BIDS

Graeme Hart is clearly nervous about the success of plans to offload his New Zealand Dairy Foods business.

New Zealand's richest man is now considering a breakup of the operation to get the sale under way. His new plan would entail splitting the Anchor fresh milk business from the dairy foods business, maker of the popular Fresh 'n Fruity yoghurt brand.

The split in itself would not prove problematic as the divisions are run out of separate plants at the Takanini site in south Auckland.

However, making the move palatable to potential buyers may prove problematic.

Philippines brewer San Miguel, fresh from trumping Fonterra's bid for Australia's largest listed dairy company, National Foods, was in the driving seat. In the heat of the battle, it was thought San Miguel would combine National Foods with Hart's Dairy Foods, creating in one swoop a transtasman force in fresh dairy products.

The reality has proved a little more complicated. It now seems the combination will, at the very least, attract the attention of the Commerce Commission.

National Foods has the transtasman licence for the Yoplait brand and, in New Zealand, it has just under 24 per cent of the dairy foods market. Marrying this business with Dairy Foods' 53 per cent share, would create a giant that would dwarf the next biggest - Fonterra's Mainland Products on 20 per cent.

On paper, the logical move for the brewer in this market is to sell the rights to the much weaker Yoplait brand. However, that may not sit well with the owner of Yoplait - France's Sodima. It is likely to be less than enthusiastic about having a separate licensee for Yoplait in New Zealand and Australia.

San Miguel, which this week extended its offer for National Foods in order to boost its chances of mopping up minorities, may well be out of the picture. (This squares with reports from Australia that it is less excited about the bid now.)

Other bidders allegedly in the frame are the international giants Danone, Nestle and two others. Their intentions remain unclear: they may be interested in parts of the business or taking it whole.

Whatever, Hart is likely to extract more value if the business is sold in its entirety. The talk of a split suggests he is lowering expectations of the potential returns.PACKAGED DEAL

The Vertex independent directors have as good as given the nod to shareholders to accept the Christchurch-based Stewart family's new bid for the packaging company.

Yesterday, they indicated they were prepared to consider an offer of $2.09. The statement was issued just before the dramatic withdrawal of the last rival bidder for Vertex yesterday afternoon.

However, the logic remains the same. The Stewarts' new offer, raised from $1.90 a share to $2.05, is a 4 per cent discount on the $2.14 Grant Samuel said was the lowest fair value offer. It is also just 2 per cent shy of the price directors have indicated they are prepared to consider. (Discussions around this price were not concluded because of matters other than price). These gaps are the same as the fluctuation of Vertex's share price within a week and are certainly not enough of a reason to hold out.

Even though the family is the last in the game, the independent directors are still not officially supporting the bid, declaring it neither fair nor reasonable. They are within their rights as their opinion is supported by Grant Samuel. But, it is hard to avoid the conclusion that factors such as the well-documented antagonism between the family-appointed directors and the rest of the board are coming into play.

BATTERED HALO

The dramatic markdown in Wrightson's profit forecasts this week appears to have been well anticipated. The bald cut in forecast full-year profit from $25.5 million to $18.8 million represents a near 30 per cent reduction. On the day, Wrightson's shares closed down 7c to $1.54.

Losing 4 per cent in a day is harsh. But the fall could have been much worse, especially as it came in a week when markets worldwide plunged. When troubled carpet-maker Feltex warned its annual profits would be some 40 per cent below market expectations, it lost almost a third of its value.

Wrightson has been insulated by a growing belief that it was always going to find the going tough. The shares peaked at $2.15 amid the euphoria over the firm's takeover of rival Williams & Kettle. But since then they have drifted south.

Wrightson's majority shareholder, former Fonterra chief executive Craig Norgate and the Otago-based McConnon family, have earned a reputation for deal-making and this also must have helped. But as the shares are now lingering below their $1.65 takeover offer, that reputation must also be open for reconsideration.