Australia's NatFoods says Fonterra bid too low

Australian dairy group National Foods Ltd said on Monday its shares were worth up to 22 percent more than a hostile A$1.6 billion ($1.3 billion) take-over offer by New Zealand dairy giant Fonterra. National Foods said its shares were worth up to A$6.65 on a stand-alone basis, compared with Fonterra's A$5.45 bid, and estimated Fonterra would also win cost savings from a successful take-over of more than A$1.00 a share.
"Accordingly, the board continues to strongly recommend that shareholders reject Fonterra's offer and intend to do so for their own shareholdings," Chairman David Crawford said in a statement.
Fonterra, which already holds 19 percent of National Foods, wants a bigger slice of Australia's A$11 billion dairy market, a market roughly equal in size to Fonterra's annual sales.
National Foods, whose products include pure milk, Yoplait yoghurt and King Island gourmet cheese and cream, is Australia's biggest milk processor. It forecast net profit of at least A$78 million in 2004/05, up 14 percent on a year, a fifth straight year of double-digit earnings growth.
National Foods also said it would pay shareholders A$0.92 a share if the Fonterra bid were unsuccessful, comprising an 84 cent capital return and a fully franked special dividend of 8 cents a share.
Under the Australian tax system, dividend franking prevents double taxation of dividends in the hands of Australian resident shareholders. Fonterra has been talking tough on its hostile A$5.45 a share bid, citing a brutal outlook for Australian dairy producers and National Foods' poor track record at sealing an acquisition. National Foods ended 1.4 percent up on Friday at A$5.79, up 6.2 percent on the bid by Fonterra, which had been sitting on the Australian dairy group's share register since October 2000.
Fonterra, owned by about 12,000 dairy farmers in New Zealand, is the world's sixth biggest dairy group.
Analysts have said National Foods is worth A$5.65 to A$6.00 a share. The Australian dairy industry has been seen as a prime candidate for an overhaul with its three big players, National Foods, farmer-owned Dairy Farmers and Parmalat Australia, fitting poorly with two big customers, supermarket giants Woolworth's Ltd and Collies Myers Ltd.