Hart's bid opens way to $11b spend-up

Graeme Hart

Graeme Hart looks odds-on to succeed in his bid to privatise Burns Philp in a move that could give him $11 billion to make more acquisitions.

Hart yesterday offered almost $1.6 billion - A$1.10 a share - for the 42 per cent of Burns Philp he doesn't own.

The deal would give him total control of $2.9 billion of Burns Philp cash, net of debt, which he could then use to further build on his Carter Holt Harvey empire.

The Burns Philp stash - the cash, plus Bluebird Foods (which it hopes to sell for $250 million), and a 20 per cent stake in Goodman Fielder - could give Hart fire power of more than $11 billion, bankers say.

That doesn't include $1.5 billion or so he could gain from the sale of Carter Holt Harvey forests.

Burns Philp has plenty of cash after the Goodman Fielder float last December and the sale of Uncle Toby's in May, but has not found any new assets worth buying.

Meanwhile, there has been speculation that Hart is interested in Australian packaging giant Amcor, which would have synergies with his CHH operations.

Hart was travelling yesterday and unavailable for comment.

In a letter to Burns Philp directors, he said that with most of its operating assets divested and convertible preference shares having reached maturity it was timely for his privately controlled Rank Group to "consolidate into one private structure".

The offer price was calculated on the basis that Burns Philp's value was "fully transparent".

Macquarie Equities analyst Andrew Kovacs backed that view.

In a report this month, he calculated Burns Philp's asset value at about A$1.05 a share, but noted that if Hart was to return cash to shareholders a fair value was A$1.10.

But some rumblings of discontent surfaced yesterday.

"I would have expected something closer to the A$1.20 mark," said Hanover Finance chief executive Andrew Schmidt. "Graeme Hart is a very good operator and I'm sure A$1.10 is a very savvy deal for him."

Hanover was acting for a US hedge fund operator that had built a "not insignificant stake" in Burns Philp.

Schmidt said: "We have advised they decline to accept at A$1.10."

He would not name the hedge fund.

The market was yesterday pricing for a successful takeover. Burns Philp's shares closed up A8c at A$1.09.

When it is expected that the bidder may be forced to raise an offer, shares in the target company usually trade above the offer price.

Sources close to Hart were confident the deal would meet little resistance.

They cited Hart's letter, which says he will not vary the offer. Australian law makes it impossible for him to renege on that statement once publicly made - although a new offer could be made if this one failed.

Hart was making the next logical move, said a source. The market was a mechanism to raise money - which Hart no longer needed.

Being publicly listed hindered his ability to move with the speed and stealth on which he has built his reputation. "He hates disclosure," the source said.

There were also likely to be tax advantages to taking the ASX-listed company private, as Hart is a New Zealand resident.

Another factor in Hart's favour is that no other shareholder has more than 10 per cent with which to block the deal.


The offer

* A $1.10 a share for the 42.4 per cent Hart does not own - a 10 per cent premium on Monday's close.

* It will cost Hart A$1.44 billion ($1.6 billion).

* The offer is conditional on a 90 per cent minimum acceptance and regulatory approval.

Hart's holdings

* Burns Philp, 57.6 per cent. Includes Bluebird Foods, 20 per cent of Goodman Fielder, about $2.9 billion cash. Bluebird Foods - worth about $250 million - is still for sale.

* Carter Holt Harvey, 100 per cent. Worth $3.3 billion, minus an undisclosed chunk of debt.

* Carter Holt's 220,000ha of trees, valued at $1.57 billion a year ago, are for sale. US timber giant Hancock is one of six potential bidders.