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Danone digs in its French heels

By Phil Boeyen, ShareChat Business News Editor

Thursday 22nd November 2001

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French food group Danone is continuing to bad-mouth Frucor's (NZSE: FRU) prospects and, while it has extended the time period for the offer, it's not budging on the price.

Danone says the offer, which was due to close on December 7, has been pushed back by a further two weeks until December 21.

"The other terms and conditions of the offer remain the same. In particular, the offer remains $2.35 in cash for each Frucor ordinary share held."

Frucor's independent directors have already advised Frucor shareholders to reject the Danone bid because it doesn't give full value to the company.

In particular they have pointed out that Danone and other potential purchasers may have significant opportunities for synergistic benefits from an acquisition of Frucor which is not reflected in the bid price.

The appraisal report has put the value of Frucor at between $2.53 and $2.96 per share.

For its part Danone is warning Frucor shareholders that, if the forecasts are overstated, the valuation of Frucor could be lower than is stated in the report.

"Shareholders should note that worse than expected performance of the UK means that the upside potential of Frucor is clearly more limited than previously thought.

"Shareholders should note that, despite what is implied in the Grant Samuel report, ownership of Frucor by Danone will not result in significant short term earnings improvements. To expand into Asia, Frucor will need to raise capital and invest heavily in long term projects."

Danone claims its bid price represents a "very significant premium" above the price where shares were trading prior to its offer.

However the share price had only just begun to move again following the September 11 attacks in the US and it's anyone's guess what it may have been trading at in today's firmer market if Danone had not moved when it did.

Frucor shareholders will now have to decide whether they should sell out to Danone or hold on for what could be a bumpy - but ultimately rewarding - longer-term ride.

Frucor admits it will now need a partner to help its star energy drink, V, to reach full potential in overseas markets because of the marketing costs involved, but on the upside the company is just beginning to reap the rewards of better distribution of V in the UK.

On Wednesday another takeover suitor, Edison Mission Energy, advised it was extending its bid for Contact Energy (NZSE: EME) but would not be raising its current bid either.

However given the Contact's strong cashflows and dividend rewards, and the reluctance of institutional holders to sell into the offer, it is looking more and more likely that the EME bid will fall over.

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