Fonterra bid for co-op
Dairy Farmers announced last week it had started a process to consider offers.
Asked whether Fonterra had put in a first round bid, Fonterra chairman Henry van der Heyden told BusinessDay that he could not answer because he was bound by a confidentiality agreement. The fact that Im bound by confidentiality should give you the answer, he added.
Around a dozen companies, including Italian dairy company Parmalat, Australian dairy co-op Murray Goulburn, Kirin-owned National Foods, Singapores Olam International and Canadian company Saputo, are thought to have put in first round bids for Dairy Farmers. One analyst said a sale multiple of nine to 11 times earnings was likely, implying a price of between $A600 million and $A800m ($NZ580m-$935m).
Van der Heyden made the comments after a big speech on Fonterras future to the large herds conference in Taranaki. In the speech he re-affirmed Fonterras intention to overhaul its capital structure to bring in new capital, reduce redemption risk and give farmers greater investment choice.
But it was unlikely that Fonterra would be able to come up with an option that created as much shareholder value as the shelved listing plan had, van der Heyden said. Maybe most farmers dont see this (value) as a priority.
Farmers had not concentrated on maximising value during the debate on the listing plan but value would be a significant issue in the next stage of these talks, he said. The co-op is now re-looking at its discarded capital structure options but no timetable has been set to discuss these with farmers.
One option that is being looked at is a system allowing farmers to trade their fair value shares internally similar to the internal trading model used by the listed Livestock Improvement Corporation.
Looking to the future, van der Heyden said Fonterras relationship with United States co-op Dairy Farmers of America, with which it has a joint venture, gave it the ability to take advantage of the increasing export milk supply coming out of California.
In 15-20 years time Fonterra could be collecting around 1.6 billion to 1.8b kilograms of milk solids in New Zealand, up from 1.2b today, van der Heyden said.
The milk could be coming from a little over 4000 farms with herd sizes of well over 1000 cows.
Fonterra could be marketing in excess of 3m tonnes of product sourced from New Zealand and potentially a similar amount or more from a combination of offshore partnerships, investments and alliances, he said.
