Goodman should keep talking with Wilmar, Perpetual says

Top shareholder Perpetual says Goodman Fielder should keep talking to extract a higher offer after Wilmar Chairman Kuok Khoon Hong flew to Sydney for face to face meetings with the food group on the weekend.

Credit Suisse, those in the food and beverage industry say, have quietly made it known for more than a year that its client Goodman Fielder would entertain takeover offers. Until the weekend no one was prepared to seriously talk with Goodman, its bankers or lawyers at Herbert Smith Freehills about an acquisition.

That was until Kuok Khoon Hong, the cofounder and executive chairman of Singapore-listed palm oil giant Wilmar International, flew into Sydney for face to face meetings with Goodman and its advisers on Saturday and Sunday.

In discussions characterized as cordial, Mr Kuok was unable to convince Goodman that a 65 cents a share offer for the Sydney-based food manufacturer was attractive. Mr Kuok has teamed up with Indonesian billionaire Anthoni Salim who controls Hong Kong-listed investor First Pacific, to try and acquire Goodman.

UBS and Bank of America Merrill Lynch, advisors to Wilmar and First Pacific, are now seeking to engage Goodman’s biggest shareholders, Perpetual and Ellerston Capital, to back their cause.

Perpetual and Ellerston together have a 24.3 per cent stake in Goodman. If they support Wilmar and First Pacific’s offer, Goodman would be delisted from the ASX and NZX and become a unit of the Wilmar and First Pacific joint venture.  

But Perpetual may want a higher bid from Wilmar and First Pacific.

On April 2, Goodman told the ASX its 2014 earnings before interest and tax would be as much as 15 per cent below analyst forecasts of $180 million. Between January 1 last year and last Thursday, Goodman’s shares had fallen 11 per cent compared to the 19 per cent rise in the S&P/ASX200 Index.

“We think the Wilmar bid is opportunistic in light of recent earnings downgrades by Goodman,” Paul Skamvougeras, deputy head of equities at Perpetual, told Data Room. “That being said we have encouraged the company to continue a dialogue with Wilmar to extract a higher price for Goodman shareholders.”

Wilmar and First Pacific say their Goodman takeover offer is a 27 per cent premium to the average price of Goodman shares since April 2, or 8.2 times forecast 2014 earnings before interest, tax, depreciation and amortisation.

Goodman’s share price performance and the track record of the company’s management is not impressive to one of Goodman’ biggest shareholders: Mr Kuok. Wilmar owns a 10.1 per cent stake in Goodman.

The $1.27 billion takeover offer for Goodman further underlines the rebound in Australia’s mergers and acquisitions market. In the year to date there have $US41.5bn worth of pending or completed takeovers, more than double the $US19.6bn in the same period last year, according to Bloomberg data.

Among the investment banks, Goldman Sachs is the number one M&A adviser in Australia having advised on eight pending or completed deals worth $13.28bn. UBS is number two with eight deals worth $US11.53bn and Credit Suisse is third with five deals worth $US10.66bn. Merrill is fourth with four deals worth $US10.08bn.

(Reporting by Brett.Cole@businessspectator.com.au)