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Goodman Fielder says it needs to see more dough to consider a takeover bid, which it says currently undervalues the company. (Giulio Saggin, file photo: ABC News)
Struggling baker and food manufacturer Goodman Fielder has received a takeover bid from a Singapore-Hong Kong consortium.
The Australian company – maker of well known brands including Helga’s, Wonder White, White Wings, Pampas, ETA, Praise, Meadow Lea and Cornwell’s – has been approached by Singaporean food maker Wilmar International and Hong Kong-listed investment firm First Pacific Company with a 65 cent per share offer.
That is an 18 per cent premium over Goodman Fielder’s last closing price of 55 cents on Thursday, and values the company at $1.27 billion.
The offer was made over the weekend, and Goodman Fielder says its board considered the proposal with its advisers – Credit Suisse and Herbert Smith Freehills – and also met with representatives from Wilmar and First Pacific.
However, the board has dismissed the current bid as “opportunistic” saying it “materially undervalues” Goodman Fielder, and is taking advantage of its current depressed share price.
Wilmar and First Pacific disagree, issuing a statement arguing that the premium they are offering is in line with recent similar deals.
“This is a compelling all-cash offer for Goodman Fielder shareholders, delivering a premium of 27 per cent above the volume weighted average price of Goodman Fielder shares since the company’s 2 April 2014 profit downgrade announcement and compares favourably with recent relevant comparable transactions,” the two companies said.
The firms say they already have substantial investments in Australia and New Zealand, with Wilmar spending $1.75 billion almost four years ago to buy CSR’s sugar division.
Wilmar already holds a 10.1 per cent stake in Goodman Fielder.
Morningstar analyst Peter Rae agrees with Goodman Fielder’s board that the offer is opportunistic, but he does not think it is undervalued.
“I only have a fair value on the company of 50 cents, because the company hasn’t been performing, it’s in an industry where it’s really squeezed by its supermarket customers and on the other side it’s subject to unpredictable commodity prices,” he told ABC News Online.
“I think Wilmar probably sees more strategic value in the business, in terms of slotting it into its existing operations.”
However, Mr Rae does not think cashed up foreign owners would do anything to alter the dominant position of Coles and Woolworths in their dealings with Goodman Fielder and other food manufacturers like it.
“You’ve got a very powerful supermarket duopoly in Australia, and I know Goodman Fielder has their ‘Project Renaissance’ underway at the moment which is designed to extract costs out of the business, but I think longer term they’ll continue to have margin erosion and a lot of the savings they get out of that will eventually disappear,” he said.
Wilmar and First Pacific say they will continue trying to engage with Goodman Fielder’s board in an effort to bring a binding proposal to the Australian firm’s shareholders.
For its part, Goodman Fielder says it remains focussed on the execution of its strategic plan to turn around its struggling businesses, by laying off more staff to achieve $25 million in cost reductions, looking at ways to “maximise the value” of its New Zealand dairy business and reviewing its daily bakery delivery model to deliver cost savings.
Investors have clearly factored in the likelihood of some bid succeeding, pushing Goodman Fielder’s share price up 18 per cent to the offer price of 65 cents by 2:15pm (AEST).
Topics:
food-and-beverage,
company-news,
business-economics-and-finance,
takeovers,
australia,
hong-kong,
singapore
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Goodman Fielder receives Singapore-Hong Kong takeover bid
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