JUST one hurdle remains to be cleared in the Wilmar-First Pacific $1.3 billion offer for Australian food giant Goodman Fielder (ASX code: GFF), with the Chinese regulator granting approval for the proposed takeover.
Nanjing Night Net

A statement released to the Australian Stock Exchange today said the Anti-Monopoly Bureau of the Ministry of Commerce of the People’s Republic of China (MOFCOM) has granted approval for the proposed joint acquisition of GFF by Singapore oils giant Wilmar International and First Pacific, a Hong Kong investment company.

Approval from the Overseas Investment Office (OIO) in New Zealand is the last remaining regulatory approval needed. Wilmar and First Pacific are continuing to progress the application with OIO.

Wilmar and First Pacific have material adverse change clauses attached to their 67.5 cent a share offer, which enables the bidders to walk away if recurring earnings before interest and tax falls $30 million or the value of net assets falls by $100 million in 2015.

GFF reiterated its support for the $1.3b bid after delivering a flat first-half profit result earlier this month, with underlying net profit slipping 1 per cent to $29.7 million as cheaper milk and wheat costs countered falling prices in bread and spreads.

While sales from continuing operations fell 5.8pc to $1066.4b, earnings before interest and tax were unchanged at $77.3 million and underlying EBIT was up 5pc after taking into account recent asset sales.

The result fell short of market expectations. Analysts had forecast an underlying net profit of $34.3m and earnings before interest and tax of $80.8m on sales of $1.09b.

However, the rise in underlying EBIT suggests that chief executive Chris Delaney’s turnaround plan is finally starting to gain traction.

While earnings fell 54pc in baking and 13pc in grocery products, EBIT from the New Zealand dairy operations soared 74pc and Asia Pacific profits rose 12pc.

GFF said an independent expert had reviewed the first half results and continued to believe that the scheme of arrangement with Wilmar and First Pacific was in the best interests of shareholders.

The Australian Competition and Consumer Commission (ACCC) announced in September it would not oppose the joint acquisition of GFF by Wilmar and First Pacific.

As part of its review, the ACCC investigated whether the two companies could jointly raise the prices of vegetable oils, but it found there were enough alternatives for consumers.

According to ACCC chairman Rod Sims, packaged vegetable oil can be readily imported from international suppliers, and is thought to have low levels of brand loyalty, “making it easier for retailers to bypass their existing suppliers”.

The shareholder meeting to consider and vote on the proposal is scheduled for February 26, 2015. Goodman Fielder says it will continue to keep shareholders updated on “any material developments”.

The scheme of arrangement needs approval from 75pc of the shares cast and 50pc of shareholders. Retail shareholders, who account for about 10pc of the shares on issue, are reported to be largely unhappy with the terms of the deal and the loss of another Australian food company to foreign owners.

Senator Barry O’Sullivan said it would be extremely disappointing to see century-old GFF fall into foreign control, especially given grower alarm about Wilmar’s actions in the sugar industry.

Wilmar owns CSR’s former Sucrogen sugar refining assets in Queensland and last year split the Australian industry by announcing it will bypass the national sugar marketing company to set up its own trading business.

Archer Daniels Midland (ADM) – which made global news with its failed bid for GrainCorp in December 2013 – upped its stake in Wilmar International before Christmas. ADM spent about $US147m to acquire 60m shares, bringing its interest in Wilmar from from 16.4pc to 17.3pc.

– with Sue Mitchell, AFR

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