Goodman directors say reject Philp offer

Goodman Fielder implied in a formal target statement yesterday that its shares should change hands for as much as $2.92, based on prices paid for some of its peers in recent cereals and snacks takeovers. Chief executive Tom Park also said Burns Philp was offering only a skinny 10 to 15 per cent premium for control, and that Goodman Fielder's early progress in its strategy to focus on retail brands justified an extended run.

``The bid of $1.85 a share is inadequate," Mr Park said.

Investors weren't greatly moved by the rebuff as they believe Goodman Fielder may struggle to attract another suitor particularly one willing to trump Burns Philp's cash offer.

``Although the board has rejected the bid, shareholders can still accept the offer and the deal goes through at $1.85 a share," said Steve Coffey, a portfolio manager at Challenger Investment Management.

Shares in Goodman Fielder, which controls Uncle Toby's, Meadow Lea, and Buttercup, rose 2c to $1.78 yesterday while Burns Philp was steady at 51c.

Chairman Keith Barton suggested if shareholders held off there was a chance of a better offer. ``Goodman Fielder is currently in active discussions with other parties which may lead to alternative proposals for consideration by shareholders," he said.

Companies including General Mills, Associated British Foods, Nestle{aac}, and ConAgra are all rumoured to have expressed interest in parts of the company, such as Uncle Toby's, but none wants the entire business. If there is to be an update on the talks, the Corporations Act requires it come between next Wednesday and January 29.

Dr Barton also gave a host of reasons for Goodman Fielder's directors' intent to knock back the offer for their personal holdings. He said the bid was too conditional, ``inadequate", and ``opportunistic" as it arrived with Goodman Fielder battling short-term spikes, caused by drought, in the prices for commodities such as wheat.

Goodman Fielder said the $1.85 offer represented only 7.5 times forecast 2002-03 earnings before interest, tax, and amortisation whereas the average retail branded food company enjoyed 9.8 times EBITDA. That implies a Goodman Fielder share price of around $2.46.

Also, recent deals in the cereals and snacks industry were completed at an average multiple of 11.5 times. If that were applied to Goodman Fielder, the stock would be worth $2.92, 58 per cent more than Burns Philp's bid.

That contrasts with analysts' valuations for Goodman Fielder which range between JB Were's $1.50 and Deutsche Bank on $1.85. Some have warned they could drop their estimates by as much as 12c a share after the company last week disclosed a shock tax liability of up to $140 million.

Mr Park declined to reconcile the difference between the market values for the company and Goodman Fielder's own analysis.