SMC may sell minority stake in National Foods

San Miguel Corp. (SMC), Southeast Asia’s largest food and beverage conglomerate, may consider eventually disposing up to 49 percent interest in Australian dairy group National Foods Ltd. to allow it to take advantage of other growth opportunities in Asia-Pacific.

In a disclosure to the Australian Stock Exchange, San Miguel Foods Australia Pty Ltd. said the divestment is one of the options being considered to limit the company’s cash outlay and allow it to pursue other expansion initiatives in the region.

SMC president Ramon Ang earlier said the food and beverage conglomerate plans to sell a minority stake in National Foods to strategic investors or to the investing public in Australia.

SMC said it may also consider increasing borrowings of National Foods as a possible option for managing its financial exposure to the Australian dairy producer should it become a wholly-owned subsidiary of the food and beverage giant.

"San Miguel has a long-term strategy of growing its beverages and food businesses in selected countries in the Asia-Pacific region. It generally prefers to acquire businesses with a strong local management team and empower that local management team to grow the business locally and expand organically utilizing the San Miguel Group’s knowledge of key Asian markets," SMC said in its disclosure.

Prior to finalizing its strategy for the National Foods business, SMC will undertake a comprehensive review as to among other things, National Food’s financial performance, long-term plans, activities, assets and market position with a view to identifying opportunities for revenue growth and other benefits and assessing its financial position.

"San Miguel intends to review the financial position of National Foods post-acquisition with an intention to ensure National Foods has an appropriate financial structure including a level of gearing that appropriately reflects its earnings profile, net assets and market position and achieves an efficient cost of capital," SMC said.

In its recent notice dated May 9, 2005, SMC reported a 17.42 percent interest in National Foods.

SMC stressed that it has not changed its intention with respect to National Foods’ business, assets or employees and is not aware of any information material to whether National Foods shareholders should accept SMC’s offer or not which has not previously been disclosed in its original bidders statement.

SMC emerged as the winner in a fierce five-month bidding war for National Foods as its rival Fonterra Cooperative Ltd. decided to withdraw its offer and sell its 19 percent stake to SMC.

The bidding war, which started since December last year, culminated in SMC’s offer of A$6.40 a share, up from its previous bid of A$5.90 and above Fonterra’s upgraded offer of A$6.20.

SMC corporate information officer Ferdinand Constantino said the food and beverage giant "welcomes Fonterra’s decision and is looking forward to completing its acquisition of National Foods" This would be SMC’s biggest acquisition as it positions itself to be one of the top food and beverage conglomerates in the region.

National Foods owns top-selling Australian consumer brands such as Pura fresh milk, King Island cheeses, Yoplait yoghurts and Fruchee dairy desserts.