Burns Philp goes to market to raise acquisition funds

Burns Philp's plan to raise A$2.1 billion (€1.3 billion) from a share offering in its Goodman Fielder business underlines the group's ambitions to dominate the Australasian ingredients market.

The immediate purpose of the offer is to provide Goodman Fielder with funds to acquire the baking, spreads and oils businesses from the Burns Philp group, acquire New Zealand Dairy Foods (NZDF) and pursue other growth opportunities.

Goodman Fielder is the largest supplier of edible fats and oils to Australian and New Zealand food manufacturers, and is the largest supplier of flour in New Zealand.

NZDF has a top three market position in each of the product categories it competes. The acquisition will therefore make Goodman Fielder a formidable player in the Australasian food ingredients market.

Goodman Fielder's acquisition of New Zealand Dairy Foods provides a platform into the dairy category in Australasia and enhances the future growth opportunities of the business," said Goodman Fielder managing director Peter Margin.

The decision to spin off the business follows the recent rejection of a bid for Goodman Fielder from a private equity consortium. Burns Philp said that it wanted to retain a strong shareholding in the newly listed business, and argued that this was in the best interests of its shareholders.

Burns Philp intends to retain a minimum 20 per cent stake in Goldman Fielder.

Indeed, as a combined business for FY 2006, Goodman Fielder will have, as Burns Philp puts it, substantial scale. The company forecasts sales of $2,462 million and EBITA of $417 million, an 11 per cent increase in EBITA on the previous year.

"Goodman Fielder's portfolio of leading brands, its track record of product innovation, customer service and its extensive supply chain infrastructure provide it with a strong platform from which to capitalise on ongoing growth opportunities across its major product categories," said Goodman Fielder chairman Tom Degnan.

A prospectus was lodged today at the Australian Securities and Investments Commission (ASIC) and the New Zealand Registrar of Companies, for an initial public offering on the Australian Stock Exchange (ASX) and New Zealand Stock Market (NZSX).

The initial public offering will be the world's ninth biggest IPO this year and takes the value of Australian Initial Public Offerings (IPOs) announced this month to A$5.5 billion.

The IPO is expected to open within ten days and following a global roadshow, to close and list in December 2005.

Burn Philp acquired the much larger Goodman Fielder food group two years ago in a hostile €1.2 billion takeover. This latest spin off follows hot on the heels of the firm's cash-boosting A$1.90 billion sale last year of its yeast and spices businesses to UK firm Associated British Foods.