New Zealand dairy giant Fonterra has today (Friday) published more details of its revised offer for Australia’s National Foods.

Fonterra is offering National Foods shareholders $6.00 (US$4.74) per share and it will offer $6.20 per share if it acquires at least 90 per cent of the shares in National Foods.  Fonterra’s offer includes an option for shareholders to accept cash or redeemable preference shares (A$RPS) or a mixture of both.

Fonterra Chief Executive Andrew Ferrier said the A$RPS may provide shareholders with a significant benefit over and above the offer price.

“I would urge those National Foods shareholders who might be eligible for capital gains tax rollover relief from the A$RPS, to properly evaluate how this option may benefit them,” said Mr Ferrier.

Fonttera pointed out that eligible retail shareholders who paid $3.00 for their National Foods shares potentially face a capital gains tax liability of around 78 cents per share if Fonterra’s offer is increased to $6.20 per share.  By electing to receive A$RPS they will be able to defer the payment of this capital gains tax liability for nearly five years.   The capital gains tax rollover relief is subject to Fonterra owning 80 per cent or more of National Foods shares and a number of other requirements that are detailed in the supplementary bidders statement.

In a letter to National Foods shareholders, Fonterra Chairman Henry van der Heyden said they should accept Fonterra’s offer because it has been unanimously recommended by the Board of Directors of National Foods in the absence of a superior proposal. Fonterra’s offer price is at a premium of 10 cents per share above the San Miguel offer price of $5.90 (after deduction of the January dividend of $0.10 per share from that offer). The premium above the San Miguel offer will be increased to 30 cents if Fonterra obtains a relevant interest in at least 90% of the National Foods shares on issue. Fonterra’s offer price is at a greater than 30% premium to the National Foods share price on 27 October 2004, the day before Fonterra announced its original offer (after considering the January dividend of $0.10 per share).  Fonterra’s offer implies an earnings multiple at the upper end of comparable transactions clearly illustrating the attractiveness of the opportunity for National Foods shareholders. And shareholders can choose to receive all or part of their consideration as A$RPS which will provide capital gains tax rollover relief for certain National Foods shareholders provided certain requirements are satisfied.

Fonterra has extended its offer to 19 April 2005.  National Foods shareholders can accept the revised offer at any time.  A new acceptance form will be included in a copy of the supplementary bidder’s statement being sent to shareholders next week.