Heat goes on at Ernest Adams

By Geoff Senescalll

Michael O'Neill faces being sacked as chairman and joint managing director of Ernest Adams if he successfully fends off a takeover by Goodman Fielder.

Furthermore, if the 235c a share offer fails, shareholders, owning 78 per cent of the local food group, plan to break the company up..

This message was delivered at an Auckland shareholder briefing yesterday by Paul Bevin, managing director of Tower Asset Management, which controls 58 per cent of Ernest Adams.

Mr Bevin said Tower had lost faith with the company, which has consistently disappointed. He questioned the assertions by Mr O'Neill - who has been involved with Ernest Adams for several years - that the company had turned the corner.

Mr Bevin said that if Goodman was not successful Tower would push for the sale of assets. Tower would also look at replacing members of the board, including the chief executive, with people with a "different set of capabilities."

Tower has the support of Spicers and BT Funds Management which jointly hold a further 20 per cent Ernest Adams. They have already accepted the Goodman offer, believing it to fully price the shares. They are calling on other shareholders to accept Goodman's offer.

So far the Australasian food giant received acceptances from shareholders owning 82 per cent of the shares. But its offer, open untill September 9, is conditional on getting to 90 per cent.

The balance of Ernest Adams is widely held, and many have been long-term holders. Prizing them away from their shares might not be easy.

Certainly among the 12 shareholders who attended the Auckland meeting yesterday there appeared to be a willingness to support Mr O'Neill, who is strenuously lobbying for holders to hang on to their shares.

Ernest Adams was in good financial health, Mr O'Neill said. It was performing well in its domestic and export markets. Plans were in place for more efficiencies.

"This is not a company that has to be sold," he said. Trying to further convince shareholders to keep their shares he unveilled a report by accounting firm Deloitte Touche Tohmatsu, which valued Ernest Adams shares at between 284c and 331c. This trumps an independent appraisal by merchant banker Grant Samuel of 235c to 265c.

Mr O'Neill also used the meeting to criticise Tower - which controls Ernest Adams' 48 per cent shareholder Gourmet Direct Investments - for rejecting offers to review the company's operations.

Instead, he said, Tower sent in Wellington merchant bankers Cameron & Co to assess Ernest Adams in April. It even got the numbers wrong.

As to his own future with the company Mr O'Neill simply said after the meeting that he did not believe Tower would do anything that was value destructive.

Ernest Adams will brief shareholders in Wellington today ahead of its agm in Christchurch tomorrow.