The chaotic Australian dairy industry is under pressure to consolidate as retailers
continue to push down prices, and industry watchers may only have to wait another
two days before a formal takeover bid is presented to struggling dairy concern
Bonlac Foods Ltd.
Bonlac had refused a A$550m takeover offer made jointly by Murray Goulburn
Cooperative Company and National Foods when it was first announced
in late February, arguing that it had not received a proper bid proposal. The
joint bidders’ lawyers have since created the necessary offer document and a
takeover valued at "a reasonable range" between A$550m and A$650m
could now happen on the condition of due diligence. A spokesman for Murray Goulburn
commented: "We are still hoping that tomorrow is possible [to present the
offer], but it might blow out a day."
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If an official bid arrives before the end of the week, Bonlac’s 2300 farmer
owners will have until 23 April to consider it before shareholders vote on another
proposal that the company forms an alliance with dairy export company the New
Zealand Dairy Board (NZDB), which is jointly owned by the New Zealand
Dairy Group of Companies and Kiwi Cooperative Dairies.
To date, the latter appears the more popular option for Bonlac, which is anxious
to secure a safe future. Having visited four major Australian centres to discuss
this deal with over 1,500 shareholders, Bonlac CEO Alex Sloan and chairman Bill
Hill believe that there exists strong grass roots support amongst the dairy
industry for the NZDB alliance.
For the deal to go ahead, 75% shareholder agreement is needed and "we
have really had overwhelming response from our shareholders to get on and pursue
the NZDB alliance," revealed Sloan. This consists of an offer from NZDB
to purchase a 25% stake in Bonlac for A$260m, followed by a cash injection of
A$80m.
The NZDB deal implies an enterprise value of A$825m for Bonlac and also provides
an important opportunity to reduce Bonlac’s debt level from A$515m to less than
A$300. The debt was described as "unsustainable" in an independent
report by Grant Sammuels and Associates and Sloan’s two-part plan for
alleviating it involves cutbacks and company restructuring, followed by the
NZDB alliance.
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By GlobalDataSloan explained: "We have taken the view that the approach we have had
from Murray Goulburn-National Foods is not really substantial and it actually
galvanises support for NZDB."
If the Murray Goulburn-National Foods takeover bid is accepted, the companies
are planning to divide Bonlac. The former will acquire the milk process and
supply division from the farmers and National Foods will take on the consumer
operations business, which sells brands including Bodalla cheese, Western
Star butter and Allowrie spreads.
