National Foods bid gets Dairy Farmers’ shareholder approval

Posted by Daniel Palmer on 13th November 2008

Milk deal

Australian Co-operative Foods Limited (ACF), which trades as Dairy Farmers, and National Foods today announced that ACF members had approved the acquisition proposal by National Foods.

On August 25 Dairy Farmers announced that National Foods had outbid other interested parties, with their $910 million offer. The deal involved a joint venture with Warrnambool Cheese and Butter for the cheese business of Dairy Farmers. National Foods have also since come to an arrangement to allow Fonterra to acquire the licence of the SKI brand.

The postal ballot closed last week, with over 96 per cent shareholder support – clearly passing the 75 per cent requirement.

“I’m pleased to report that the National Foods proposal received the support of 96.3 per cent of ACF active members who cast formal votes in the special postal ballot,” ACF Chairman Ian Langdon said. “On an actual vote basis, this equated to 1,292 formal votes being cast in favour of the proposal and 49 formal votes cast against.”

“More than 88 per cent of ACF’s total number of active members chose to exercise their right to vote in the special postal ballot – indicating a high level of interest in the proposal,” Mr Langdon suggested. “Following this successful ballot, a court hearing will take place on 18 November to seek approval of the scheme. If court approval is granted at this time, it is proposed that the scheme will be implemented on 26 November – at which time ACF members and qualifying former members will be paid their entitlements.”

The National Foods proposal also required Dairy Farmers Milk Co-operative (DFMC) to enter into revised supply contracts with new or existing suppliers until at least 30 June 2010 for minimum specified milk volumes by region. Mr Langdon is confident that the minimum milk volumes will be reached.

“In the view of the ACF Board, the timing was right to implement a trade sale in relation to the business, given the completion of a business transformation program to convert it from a traditional supply focussed co-operative into a fast moving consumer goods business along with ACF’s strong business performance,” ACF Chief Executive, Rob Gordon, said. “The National Foods proposal represents an enterprise value of $910 million for ACF, which, in turn, implies a transaction multiple of 12.8x fiscal 2008 EBITDA.”

National Foods Managing Director Ashley Waugh said he was delighted with the support of ACF members but noted that combining two large companies will not be easy.

“This is a significant milestone for ACF and National Foods, and we thank ACF members for their support and commitment to the opportunity which this now provides,” Mr Waugh said. “We still have some hurdles to clear, but should we succeed in bringing National Foods and ACF together, we will work with the management and employees of Dairy Farmers to ensure a smooth transition.”

“Bringing together two large organisations is not a task that can be rushed, and our initial focus will be on maintaining ‘business as usual’ through December and the Christmas period. Customers and suppliers will not see significant operating changes as we ensure the Christmas trading period is met.”