Goodman Fielder to sell $720 million worth of assets?

Posted by Daniel Palmer on 5th March 2009

Goodman Fielder, Australia’s largest food manufacturer, could dispose of A$720 million of assets in the wake of a strategic review that is currently underway, according to reports.The two divisions considered most likely to be under scrutiny are the $200 million commercial oils business and the $520 million New Zealand dairy division, the Australian Financial Review advised, citing the views of analysts at Merrill Lynch and ABN Amro.

There were rumours in January that Parmalat had a keen interest in Goodman’s NZ dairy business, although they have since been quashed by the Italian dairy giant.

Parmalat, which owns the Pauls, Vaalia and Physical brands, last year failed in an attempt to expand their dairy operations, withdrawing their bid for Australia’s Dairy Farmers after being unable to come to a suitable agreement with their proposed joint venture partner Murray-Goulburn.

Italian newspaper la Repubblica said in January that the dairy giant was mulling a bid for Goodman Fielder’s dairy unit as Chief Executive Enrico Bondi sought ways to shore up margins in a difficult economic environment.

There have also been suggestions that other prominent dairy players may make a bid for Goodman’s dairy unit, with Kirin Holdings, the owner of National Foods and Dairy Farmers, and Canada’s Saputo among those rumoured to be possible players in any sale.

In August 2008, Goodman recorded a $170 million write-down of their NZ dairy business – which contributes about one-sixth of group revenue.

The Australian firm last year advised they were looking into potential opportunities in the Australian dairy sector, as they sought to ensure a diversified product range could provide a more compelling offer to supermarkets. This plan will ensure a reluctance to sell but, given current market conditions, the company is reportedly entertaining the idea of disposing of some of their underperforming assets.

Cargill was viewed as a potential buyer of the commercial oils business while Goodman Fielder could also consider offloading its retail oils division, which makes Meadow Lea margarine, the Australian Financial Review reported.