Fonterra sits out brewer's shuffle

Fonterra has shrugged off pressure to lift its takeover bid for Australia's National Foods by extending its offer deadline by two weeks.

As news of an ownership shake-up for rival bidder San Miguel emerged yesterday, Fonterra decided to use that time to continue to crunch the numbers on National Foods' books.

While Fonterra completes the due diligence, speculation surrounds the decision by the Philippines Government to sell its 40 per cent stake in brewer San Miguel.

Some market watchers had picked Fonterra to trump San Miguel's superior bid this week as the deadline for making changes to offer conditions approached.

Instead, the dairy giant extended the closing date for its A$5.45 offer from February 15 to March 8 secure in the knowledge that the San Miguel offer does not close until March 18.

It is the third time Fonterra has extended since launching the bid last October.

Some analysts described the delaying tactic as prudent while others called it conservative and a missed opportunity to put some heat back on San Miguel.

Australian stock exchange rules require that any changes to takeover offer conditions be made at least seven days before the offer closes.

That now makes March 1 the date on which Fonterra is likely to raise its bid - if it decides it is worth it.

Analysts are picking it will take a bid of at least A$6.17 a share to get full control of National Foods - putting a value of about $2 billion on the ASX listed seller of milk, cheese and yoghurt.

Fonterra management yesterday declined to comment on their move.

In anticipation of getting an improved offer, National Foods granted Fonterra the chance to look at its books last week.

A source said it made sense for Fonterra to take its time and make the most of what was a rare opportunity.

"Typically in a public company takeover, you don't get to do such a thorough due diligence so it's prudent of Fonterra to make the most of it." He said there was no risk in waiting two weeks.

The market was well aware of Fonterra's position so there would not be any rush by shareholders to accept the San Miguel bid.

The two-week extension will also give Fonterra time to see what impact, if any, the shakeup of San Miguel's ownership structure has.

Fonterra would not comment on the issue but a source said the situation was being watched with a lot of interest.

"It could be a bit of a destabilising factor for San Miguel's bid," the source said.

An Australian spokesman for San Miguel said the sale was not relevant to the takeover.

"The San Miguel bidder's statement is in the hands of National Foods shareholders and the bid will not be affected," he said.

What's on offer

* Fonterra's offer A$5.45.

* San Miguel's offer A$6.

* Fonterra has extended its deadline until March 8.

* San Miguel's bid closes March 18.