Wilmar threatens to ditch Goodman deal

Wilmar will scrap its $1.27bn takeover offer if Goodman Fielder's NZ dairy sale proceeds.

Singaporean agribusiness Wilmar has slammed food manufacturer Goodman Fielder over its plans to sell off its New Zealand dairy business, saying it will scrap its $1.27 billion takeover offer if the sale proceeds.

Goodman’s adviser Credit Suisse has sent an 11-page “information flyer” to potential buyers of the dairy business, stating it has average revenue of $NZ500 million ($461m) and earnings before interest, tax, depreciation and amortisation of about $NZ60m.

The valuations appear at odds with a Credit Suisse document sent to potential buyers of the business in March, which estimated the division would report earnings of just $32.1m in the current financial year.

The lower estimate was made before Goodman issued an earnings downgrade on April 2, driven partly by an increase in NZ milk costs, which would have lowered the number even ­further.

However, the EBITDA estimate of $32.1m was made before the March 31 sale of the loss-making smallgoods business, which reported earnings as part of the dairy division, and did not include earnings from the company’s Asian dairy operations, among the assets now for sale.

The flyer makes clear that the $NZ60m earnings estimate adds back the smallgoods losses and Asian earnings, and is calculated as an average of EBITDA across the past four years.

Wilmar, which owns a 10.1 per cent stake in Goodman, said any asset sale could prompt it to take off the table its indicative 65c per share offer.

“It is a condition of our indicative proposal that Goodman Fielder does not make any material asset sales,” a company spokesman said.

“Any potential sale of the NZ dairy business needs to be weighed against the risk it poses to the certainty of a full cash offer for the entire business. Goodman Fielder shareholders risk losing that offer and being left holding an investment in a diminished vehicle if any asset sales are conducted.”

Sources close to the Wilmar camp have accused Goodman of pushing ahead with the dairy sale, which had been flagged as early as February, as a tactic to leverage a higher bid.

CIMB analysts Alexander Beer and Daniel Broeren have said they believed the company was worth 75c a share based on the ­average earnings multiple in similar deals.

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