Are the bidders for Goodman Fielder (GFF), Wilmar International of Indonesia and Hong Kong’s First Pacific, trying to wriggle out of their $1.3 billion bid for the breadmaker, or at least trying to again force down the price?
Goodman Fielder said yesterday a shareholder meeting to approve the scheme of arrangement had been delayed until the first quarter of next year – four to six months after it was first envisaged.
Delays securing approval from the Ministry of Commerce in China were blamed, with the scheme of arrangement end date being pushed out from December 31 2014 to March 31 2015.
That is after the shareholder meeting originally set down for November 3 was postponed in August until late that month.
The delay has raised concerns in the market that the bidders have got cold feet and as a result there is an increased risk the deal will not proceed, or at a lower price.
Goodman shares closed yesterday at 63c, down 1.5%.
That’s a discount to Wilmar and First Pacific’s 67.5c a share offer, reflecting a combination of the belief there’s no other bidders, offset by the slowly growing fear the deal could evaporate.
GFF 1Y – Goodman bid set to evaporate?
Wilmar and First Pacific have played hardball throughout the bid so far. They originally offered 70c a share but reduced the offer in July to 67.5c after conducting due diligence.
With that in mind some brokers argue that it wouldn’t surprise if they walk away if the delays lengthen, or regulatory approvals take longer than expected.
Wilmar and First Pacific are awaiting approval from the Foreign Investment Review Board and the Australian Competition and Consumer Commission.
And they are also waiting on approval from China Ministry of Commerce (MOFCOM) which is now expected to take longer than expected.
Competition regulators in China are becoming more and more assertive, and questioning more foreign deals, as well as the performance of companies inside China. Wilmar and First Pacific already have extensive financial and operational links to China.
"While Wilmar and First Pacific are continuing to progress the required regulatory approvals, Goodman Fielder and Wilmar/First Pacific now anticipate that the process for obtaining approval from the Ministry of Commerce in China is likely to take longer than initially anticipated," Goodman Fielder said in yesterday’s release.
Brokers here also point to the usual ‘material adverse change clause’ in the Goodman Fielder scheme implementation agreement which allows Wilmar and First Pacific to walk away from their offer if Goodman Fielder’s recurring earnings before interest and tax falls $30 million or more, or the value of net assets falls by $100 million or more.
There are claims that a bread price war in New Zealand could see Goodman Fielder earnings under new downward pressure, thereby enabling Wilmar and First pacific to call off their bid, or try to reprice it for a second time.
Analysts and investors are concerned that the introduction of $1 a loaf bread in New Zealand could have a significant impact on Goodman Fielder’s New Zealand baking earnings.
