Fonterra to make cash offer for National Foods
Fonterra announced today that it intends to make an off market takeover offer for all of the shares of National Foods
Fonterra, will make a cash offer of A$5.45 per share, valuing National Foods at A$1.62 billion. The offer will be
subject to a minimum acceptance provision of acquiring more than 50 per cent of the company’s shares. Fonterra is
currently National Foods’ largest shareholder with a 17.2 per cent stake in the company and has an agreement to acquire
an additional 1.3%, conditional on FIRB approval.
This generous cash offer provides shareholders with an outstanding opportunity to realise immediately a premium value
for their shares. The offer price is well above the highest level ever reached by National Foods. In particular:
It represents a strong premium to National Foods’ share price performance:
Closing price (27/10/04) 16.7%
1 month VWAP prior to SPC announcement(3) 21.7%
3 month VWAP prior to SPC announcement (3) 20.6%
All time record high closing price 12.6%
It implies highly attractive valuation multiples compared with the overall market:
Fonterra Offer (1) ASX200 (2)
2005 Cash PE 19.6x 13.2x
2005 EBITDA Multiple 10.5x 7.9x
(1) Based on broker consensus estimates
(2) Based on CSFB research estimates
(3) VWAPs (Value Weighted Average Price) based on period to 8 October 2004, the last day of trading prior to National
Foods’ announcement of discussions with SPC Ardmona.
Fonterra Chairman, Henry van der Heyden said today: “This is our preferred option to achieve our objective for entering
the national chilled milk and yoghurts markets in Australia. These are attractive growth categories, with good growth
prospects and solid export potential to Asia. The business complements our existing strengths in cheese and spreads in
“This is a full cash offer that represents a unique and compelling opportunity for National Foods’ shareholders to
realise the best value for their shares now, as opposed to being exposed to the significant risks inherent in National
Foods’ pursuit of transactions outside of its core business, such as any proposed SPC Ardmona merger.
“We have a firm view about the best future direction of National Foods and we want to ensure this is adequately
considered by the Board on behalf of all shareholders.
“We believe National Foods’ best future lies in a focused dairy consumer business – not by diversifying into non-dairy
products which has not proven to be a successful strategy for National Foods in the past.
“Fonterra is interested in National Foods, not SPC Ardmona. Our bid is conditional on any proposed transaction with SPC
“We think National Foods’ Board should permit its shareholders an opportunity to accept our offer so we are urging
National Foods to put on hold any decision on any proposed SPC proposal.”
Andrew Ferrier, Fonterra’s Chief Executive Officer, said today: “Our entry into the national milk market and yoghurt in
Australia from our leadership position of cheese and spread products will build a strong Australian base for growing
significant export revenues to Asia, which is Australasia’s closest large market.
“We see this as a logical and sound business direction considering Fonterra is already one of the largest Australian
“We have a long term commitment to the Australian market and Australian brands. We have a number of brands in Australia
that are household names - like Mainland, Perfect Italiano and Western Star - and we sell products under a number of
leading brands in Australia including, Bega and Cadburys.
“With our strong track record in innovation and research and development competency, we believe significant benefits
will flow through to the Australian dairy industry,” said Mr Ferrier.
“The Australian dairy sector is suffering difficult times because of deregulation and the drought. The stability that
Fonterra brings to National Foods, along with a continued focus on dairy, will help to restore confidence and growth to
“A globally competitive sector will benefit all those that participate – dairy farmers, manufacturers and the economy as
Fonterra is one of the largest dairy companies in the world and it is the world’s biggest dairy exporter. It is also a
world leader in large-scale milk procurement, processing and management.
In Australia, Fonterra is one of the largest dairy companies with dairy manufacturing, domestic sales and export
operations throughout the country, employing more than 2,000 people in Australia. Fonterra’s Australian businesses
generate more than A$1.4 billion per annum in turnover and its brands account for 14 per cent of dairy sales in
The bid conditions include:
Acquiring a holding of more than 50 per cent of National Foods shares.
National Foods not announcing or proceeding with any merger or similar arrangement with SPC Ardmona.
Disclosure to the ASX by National Foods of details of any existing contracts under which the other party might have a
right to terminate or vary the contract as a result of Fonterra’s acquisition and waiver by that other party of all such
No decline in the S/ASX 200 Index below 3,250.
All regulatory approvals
No material adverse change in the business of National Foods
No material acquisitions, divestments or joint ventures by National Foods
With regard to the regulatory approvals, Fonterra believes that the only likely competition issue in Australia is in
relation to market milk in Western Australia.
It is Fonterra’s view that this would be resolved through the divestiture of market milk assets of the merged group in
“We have had a preliminary discussion with the ACCC on the matter,” added Mr Ferrier. “We will continue to work with
them constructively as they conduct market inquiries and we work together on the divestiture in Western Australia.”
In New Zealand, Fonterra believes that any issues arising from the acquisition of National Foods’ yoghurt and dairy
dessert operations can be satisfactorily resolved but Fonterra will be working with the New Zealand Commerce Commission
regarding these matters.
Fonterra’s offer will draw on existing bank relationships. Fonterra has a strong credit rating and significant unused
Fonterra’s bid will be made through a wholly-owned subsidiary.