Merger talks boost National Foods and SPC

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The Australian food industry could be set for a significant consolidation with confirmation that dairy producer National Foods and fruit cannery SPC Ardmona are in merger talks to form a new A$1.8bn company.

Shares in National Foods and SPC Ardmona rose sharply on the Australian Stock Exchange Tuesday when, after a week of speculation, SPC chairman David Meiklejohn said the two companies were in ?preliminary discussions? following a formal approach last Friday.

National Foods shares put on 5 per cent to A$4.75, while SPC Ardmona - which had been in a trading halt - jumped more than 15 per cent to A$1.88 after the stock resumed trading.

Sydney-based brokers said it was likely National Foods could offer as much as A$2 a share for SPC Ardmona, valuing the company at A$470 million.

Mr Meiklejohn said the deal could only go through if the SPC board agreed, and said it was ?unlikely to succeed in a hostile environment.?

He said he had told the SPC chairman, Barry Capp, that ?time was of the essence.?

The merger of National Foods, Australia?s only listed dairy producer, and SPC Ardmona would unite some of the country?s major domestic food brands, such as Pura Milk, Yoplait Yoghurt, King Island cheese range with SPC Ardmona?s own brand of packaged fruit and jams.

While National Foods is calling the deal a merger, the differing size of the companies, with National Foods at A$1.4bn and SPC at A$470m, means that analysts are viewing it more as a takeover.

?National Foods have said for the last year they want to be acquisitive, not just in Australia but internationally, and SPC is a nice little bolt-on which diversifies their business,? said one fund manger, who holds National Foods shares.

In its most recent results, announced in August, National Foods posted a 14 per cent profit increase to A$68m for the year to June 30 2004.

There are some barriers to a deal, such as a 20 per cent limit on any shareholder stake.

SPC Ardmona was formed by the 2001 merger of fruit co-operatives based in northern Victoria, and around 360 growers own 15 per cent of the company.

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