Brewer tops Fonterra bid

Filipino brewer San Miguel turned up the heat on Fonterra yesterday, topping its bid for Australian dairy company National Foods by about $65 million.

Australian stock exchange listed National Foods is the jewel in the crown of the Australasian dairy sector. This latest bid in the high stakes takeover duel values it at $2.08 billion.

San Miguel has offered A$6.40 a share, trumping Fonterra's offer of A$6.20 for full control.

Shares in National Foods rose to A$6.48 yesterday, prompting analysts to speculate that Fonterra's next bid will be at least A$6.50.

The bidding war is making some of Fonterra's farmer shareholders uneasy but Australian analysts yesterday called San Miguel's move predictable and said Fonterra was still likely to respond with another offer.

Dairy Farmers of New Zealand chairman Kevin Wooding yesterday stuck to his earlier view that shareholders would have to trust the Fonterra board to make the right decision.

Farmers were understandably nervous about the big numbers but it was up to the directors to be sure the deal returned value, he said.

Other dairy farmers members contacted by the Herald expressed more concern.

Wairarapa representative John Coveney said farmers were not that well informed.

"I've had faith so far but if they cock this one up I might not afterwards," he said.

Farmers were getting more from the media than they were from Fonterra, he said.

It will be playing on the minds of many farmers that at A$6.40 Fonterra would now pocket $380 million if it sold the 19.9 per cent stake it already holds in National Foods.

The National Foods board of directors wasted no time recommending the new offer to its shareholders yesterday. However few are likely to accept while Fonterra remains in the hunt.

The giant co-operative responded with a short statement saying it had noted the revised bid and was considering its options.

Sources close to Fonterra said the development had been widely expected all week.

"I don't think Fonterra's out of the game yet," the source said.

San Miguel's move was entirely by the book, said consumer staples analyst Pierre Grobler, of Sydney-based brokers CommSec.

"It was textbook stuff. In fact we might have expected them to go a little bit higher," he said.

Fonterra's bid has a redeemable preference share component which offers retail investors A$6.35 of value because of its tax status.

So the new San Miguel bid did not go far past that, Grobler said.

In January CommSec predicted that Fonterra would win the bidding war for National Foods but that it would need to pay between A$6.80 and A$7 a share - valuing the company as high as $2.25 billion.

Grobler said the events of the last week - including a ruling against Fonterra by the Australian Takeovers Panel - had done nothing to the change that view.

That ruling forced Fonterra to disclose details of a proposed joint venture with Yoplait, which will come into effect if Fonterra takes full control of National Foods.

National Foods

October 28: Fonterra offers A$5.45 per share (value A$1.62 billion).
December 31: San Miguel bids A$5.90 (A$1.75 billion).
March 4: Fonterra makes revised offer of A$6.20 (A$1.84 billion).
Yesterday: San Miguel offers $6.40 (A$1.9 billion).
Next move: The market predicts Fonterra will bid at least A$6.50 (A$1.93 billion).

- Additional reporting, Derek Cheng