Goodman bid fraught with risk

By Nick Stride

Friday 14th March 2003

Graeme Hart is today expected to secure control of the Goodman Fielder board but his battle to create a transtasman food giant is still highly risky.

Mr Hart's Burns Philp this week secured acceptances for 54% of Goodman's shares and the target company's directors must decide today whether to welcome Burns Philp directors on to the board. Analysts said there was little point in the Goodman board continuing its opposition.

Board control will help Mr Hart but he is highly exposed unless or until he secures 90% of Goodman, and access to its cash flows.

At 54%, assuming Burns Philp commits to paying accepting shareholders by declaring its bid unconditional, it will have to start paying interest on about $A1.6 billion of debt using its own cashflows. A successful takeover will commit it to servicing $A2.7 billion but it will be able to add Goodman's cash flows, which last year were $A327 million.

With board control Mr Hart will have a variety of options for extracting Goodman cash to help pay his bills. These include asset sales, share buybacks, and special dividend payments.

If the Goodman board digs in its heels Burns Philp could still walk away from a bid that would leave it exposed to the economic downturn many observers suspect a war in Iraq could trigger.

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond

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