The Philippines-owned San Miguel beer and
food company, has lifted its offer for National Foods – Australia’s
largest dairy company – by an effective 50c a share to $6.40, topping
the offer from New Zealand rival Fonterra, of $6.20 (under certain
conditions).

The higher offer from San Miguel values National
Foods at just over $1.9 billion and represents around a $1 a share more
than the original offer from Fonterra late last year
(San Miguel had offered $6.00 a share, but this was reduced to $5.90 by the National Foods Interim Dividend).

The higher offer was announced today
just after trading opened on the ASX and National Foods shares were
unchanged on $6.40, having traded at this level in expectation of a
higher offer from San Miguel, after the company scored an important win
in the Takeovers Tribunal earlier in the week. The Tribunal
decided that Fonterra would have to reveal some details of an agreement
with French Dairy giant Sodima, owners of the Yoplait licence.

Yoplait
is perhaps National Foods most important dairy product and Fonterra
revealed that the deal it had reached with Sodima (triggered under the
National Foods licence by the Fonterra offer) would see upwards of $300
million in value transferred to the French group by Fonterra should it
be successful in acquiring National Foods.

San Miguel’s
announcement will have repercussions in New Zealand among the dairy
farmering shareholders of Fonterra, who are already restless over the
acknowledgment that the higher bid for National Foods will cut returns
to farmer shareholders by around $140 million or so.

The higher
offer from San Miguel is aimed at adding to the pressure that the
impact of the Sodima deal will have on the shareholder farmer returns
in Fonterra. Fonterra will now have to further cut returns to its
shareholder farmer owners if it’s to top the latest San Miguel offer and
win control of National Foods – a prospect that has grown a little more
unlikely.

The San Miguel offer of $6.40 a share is unconditional
except for the 50% minimum acceptance condition and it has been
extended to 29 April. The current Fonterra offer of $6.00 a share rises
to $6.20 should Fonterra achieve more than 90% acceptances.

Peter Fray

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