When Singapore group Wilmar International first revealed in 2012 it had built a stake of 10% and failed in an approach to Goodman Fielder (GFF), the latter’s shares jumped 33% to a high of 69c on the day of the announcement.
Despite that encouragement from the market, the deal wasn’t done and Goodman shares fell, and then rose as its prospects improved, only to tumble again with a succession of downgrades, write offs and other examples of weak performance, the latest at the start of this month when the shares plunged 22% in a day.
Yesterday, when Wilmar launched another takeover attempt, in partnership with Hong Kong bank First Pacific (which is part of the huge Salim family empire of Indonesia, which controls Indofoods, that country’s major food company), Goodman Fielder shares jumped by around 19% to a day’s high of 65.5c and closed at 63.5 cents, a gain of 15.5%.
Based on that reaction, all Wilmar (which bought CSR’s Australian sugar business four years ago for more than $1.5 billion and is controlled by Indonesian interests, but listed in Singapore) has to do is add some cash and the game is over.
That investors couldn’t bid Goodman Fielder shares up to the level they were during the last round of takeover speculation involving Wilmar speaks volumes about how little local investors value Goodman’s prospects, even though its board knocked back the offer, worth $1.27 billion, saying the offer is too low.
The market doesn’t agree and reckons no one else will emerge with a counter offer.
Goodman Fielder shares are down from a high of 77c a year ago and a high in that time of 81c. That says it all. Remember they re-listed at $2 a share back in 2005 after having been taken private a few years earlier.
GFF 5Y – Goodman Fielder rebuffs another takeover
Singapore’s Wilmar International, which has the 10% stake in Goodman Fielder, and First Pacific Company have jointly offered 65 cents for every Goodman Fielder share (16c under that 2013 high).
With no final dividend likely because of the earnings weakness, and the board unable therefore to pull an upgrade out of the hat, all the bidders have to do is add say 5c a share and the deal should be done.
"The board believes that the current proposal materially undervalues Goodman Fielder and is opportunistic," Goodman Fielder said plaintively in yesterday’s statement.
"The board has advised Wilmar and First Pacific accordingly."
But the company said it would continue to assess other opportunities to maximise shareholder value and it has appointed financial and legal advisers.
That sounds like GFF’s board is angling to get a higher offer in exchange for their favourable recommendation.
Goodman Fielder recently announced it was bringing forward its plans for 300 job cuts in response to a weaker than expected financial performance after revealing an earnings downgrade on April 4.
Wilmar is the world’s largest palm oil trader (which has earned it criticism on a number of fronts, with Norway’s sovereign wealth fund selling its stake as a result of those comments).
First Pacific controls 50.1% of IndoFoods, Indonesia’s biggest noodles group (a staple in that country) and has interests in the Philippines.
In revealing its 10% stake in Goodman Fielder in 2012, Wilmar said Goodman’s baking, dairy and oils brands would fit with its consumer business in Asia.
The joint bid for GFF comes from two of Asia’s largest food companies and most prominent families.
The Salim family in Indonesia also control telcoms and other food companies in Indonesia and Philippines, as well as mining interests, toll roads, dairying, water and healthcare.
Wilmar’s earned criticism for its palm oil trading and growing activities which it is claimed destroy the environment, especially on Sumatra and endanger wildlife such as the Sumatran Tiger.
