Foreign investment vital for the nation, declares Goodman chief•...

Foreign investment vital for the nation, declares Goodman chief

• BY:BLAIR SPEEDY
• From:The Australian
• March 10, 2012 12:00AM

GOODMAN Fielder chairman Max Ould has defended foreign investment as vital to Australian agribusiness, as the company waits on a takeover bid from Singaporean food processing giant Wilmar.

In his first interview since Wilmar revealed it had accumulated a 10.1 per cent stake in Goodman last month, Mr Ould rejected calls from Nationals leader Warren Truss and independent Queensland MP Bob Katter to impose stricter controls on foreign investment in Australia's food sector.

"Our view is that we welcome foreign investment -- the capital markets aren't big enough to support businesses like Goodman Fielder, so we have quite a number of shareholders who are offshore, and I would like to see that remain," he told The Weekend Australian.

Mr Ould said institutional shareholders had told chief executive Chris Delaney they wanted the Goodman board to engage with Wilmar if a takeover bid were to emerge.

"Chris has had dialogue with the major institutions, particularly since Wilmar purchased its 10 per cent, and he got a very strong message they would encourage the board to look at that opportunity, but not to automatically roll over and accept any price," he said.

However, there was support among investors for the company's turnaround plans, which includes the sale of its oils and milling divisions, which were identified as "non-core" following a strategic review released in November.

The company's plans involve cutting annual costs by $100m over the next three years, restructuring its baking business and shutting down factories at Bunbury in Western Australia and Rotorua in New Zealand.

"There's a growing confidence in Chris's strategic plan from the major shareholders, and I think that was reflected in the recent share price, in that they felt it was an opportunistic pricing opportunity that Wilmar placed on the table," Mr Ould said.

Goodman shares in January hit a record low of 37.25c, less than one-fifth the $2 per share paid by investors who bought into the company's 2005 initial public offering.

The stock came under fire following a discounted $259 million equity raising in August and a 77 per cent slide in first-half earnings.

However, the shares have traded consistently above 60c since February 27, when Wilmar laid out $92.6m for 154 million shares at that price. Wilmar had already accumulated 43 million Goodman shares in a series of trades during October and November, with the latest purchase taking its holding from 2.2 per cent to 10.1 per cent.

Mr Ould said neither the board nor any institutional shareholders had nominated a price they would be prepared to accept or grant due diligence access to its accounts.

Analysts have speculated that Goodman could be worth up to $1.02 a share in the event of a takeover, at which price the company would have a market valuation of $2.07bn -- seemingly putting it well within the grasp of Wilmar, which has a market capitalisation of $23.7bn.

Wilmar has said it is "assessing whether to increase its shareholding in Goodman Fielder", but refused to comment on whether it would make a takeover offer.

While there had been no discussions with Wilmar regarding their plans, Mr Ould said he expected the Singaporean company would eventually make a full takeover offer, despite speculation from market watchers that it merely wanted leverage over the sale process of the oils division.

He said Wilmar had made some preliminary approaches to Goodman regarding a purchase of the oils business more than a year ago, and Wilmar chief Kuok Khoon Hong has described the division as "complementary" to its own oil processing division.

An information memorandum is expected to be released to prospective buyers by corporate advisers Greenhill Caliburn next week, after which indicative offers will be lodged and the highest bidders granted access to the company's accounts.

But Mr Ould noted that the potential predator was not known for taking passive investment holdings in other companies.

"I think they have shown more desire to integrate their businesses rather than just be a passive investor . . . when they first appeared on our register the indication from them was that they saw real value in our business," he said.

"Of course they were interested in the oils because that's a cornerstone activity of their business, but they were more broadly interested in all that Goodman had to offer."

Mr Hong has said Wilmar wants to "work with Goodman Fielder and its management to improve Goodman Fielder's performance over time", a statement Mr Ould agreed could suggest Wilmar wanted a position on Goodman's board or to engage in a joint venture of some kind.

"It could, but they haven't made a proposal on either of those fronts -- if it was a joint-venture opportunity then we'd seriously look at it," he said.

The chairman said he did not expect a takeover approach by Wilmar to meet any objections from either competition or foreign investment regulators, despite the Singaporean company's existing holdings in the Australian food processing sector.

Wilmar bought sugar processor Sucrogen from CSR for $1.75bn in 2010, expanding its holdings in December with the $120m purchase of the Proserpine Co-operative Sugar Milling Association. "On the export side of the business, they export some packaged oil to some Australian retailers, so there is trade at that level, but in terms of Sucrogen I don't think there would be any conflicts, so I think they'd probably have little problem with competition," Mr Ould said.

"The regulators haven't seemed to be concerned about offshore investing into the agribusiness space, and in terms of food processing, about 80 per cent of the operations in this country are overseas-owned already, so I doubt there would be concerns from either of those regulators."

In building up a 10 per cent "blocking" stake in Goodman Fielder, Wilmar may have reduced the risk of being forced to engage in a bidding war with other potential buyers, with Mr Ould saying the company fielded takeover approaches from a number of investment banks acting on behalf of anonymous buyers last year regarding takeovers.

However, none of the bankers had come back to the board since Wilmar's share raid. "We know that there were a couple of private equity funds beating the bushes, but we just said to the people that approached us, 'if anyone's got an offer, put it to us and the board will consider it', but there were no offers and it didn't go any further and it certainly hasn't since Wilmar popped on to the register," he said.

http://www.theaustralian.com.au/business/companies/foreign-investment-vital-for-the-nation-declares-goodman-chief/story-fn91v9q3-1226295450874