Investors have signalled they want at least another 6% beyond Fonterras bid of A$5.45 a share, unveiled a month ago, by keeping National Foods share price at around A$5.75. National Foods lowest price this month was A$5.68 on November 1. It touched a record high of A$5.86 on November 9, about 10 days after Fonterra, which already owns a fifth of the company, made its offer. The shares closed on Friday at A$5.73.
A rival bid would be the only catalyst for a higher price from Fonterra, Chief executive Andrew Ferrier said. Ultimately, I think that is probably correct, Mr Ferrier told Australias Business Sunday television programme. The offer was about 17% above National Foods closing share price of A$4.67 the day before the offer and Mr Ferrier said he believed this hefty premium would spur investors to accept. Mr Ferrier, who heads the worlds biggest dairy exporter and sixth-biggest dairy group, said a rival bid was unlikely. Nobody has the synergies we have to be prepared to put a price as aggressive as weve already put on the table, he said.
National Foods spokesman Ian Greenshields said the synergy value to Fonterra showed its offer was too low. It does not reflect fair value for National Foods as a stand-alone asset, it does accurately reflect the strategic value we hold for them, and it does not accurately reflect the synergy benefits that only Fonterra can get, Mr Greenshield told Reuters. Asked whether the company would get an independent experts opinion, Mr Greenshields said it would reveal any valuations or other strategies in its upcoming official document.
Analysts have said National Foods is worth at least A$5.65 a share to Fonterra, and some have said Fonterra could pay up to A$6 a share before it started eating into the estimated A$30 million in savings it would get from joining with National Foods. Farmer-owned Fonterra, which controls almost all of New Zealands dairy exports, has annual sales total about A$11 billion, the size of Australias entire dairy market.
Fonterra said its annual sales in Australia total A$1.4 billion, or about 14% of the nations dairy sales, mainly through its Mainland cheese and Anchor Star butter. National Foods has long been seen as key to any shake-up of the dairy industry in Australia, which has three big players and is seen as having room for only two. It has tried to shield itself from predators by buying a rival but has always been rebuffed or outbid.
Sales of National Foodss Pura milk, Yoplait yoghurt, King Island gourmet cheese and other products totalled about A$1.3 billion last year. Fonterra bought 17.2% of National Foods about three years ago and has since bumped its stake up to about 19%. Mr Ferrier said it would not sell its shares, so a rival bid would not succeed. Weve been very clear that if somebody was to try and come in, we are not sellers...at any price, he said.