Goodman Fielder chief executive Chris Delaney has played down concerns over Woolworths' aggressive move to cut its Homebrand white bread to 85¢ a loaf and declared he wants to stay in the job if the breads and spreads maker is acquired by its foreign suitors.
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The maker of Wonder White bread and Meadow Lea margarine has recommended a $1.3 billion takeover bid from Singapore oils trader Wilmar International and Hong Kong investment company First Pacific.
Last week the Australian Competition and Consumer Commission gave the deal the green light even though it will increase Wilmar's share of the edible oils market to more than 50 per cent.
Speaking on the sidelines after addressing the American Chamber of Commerce in Sydney on Tuesday, Mr Delaney said he wanted to stay in the CEO role if the deal went through. "That has not been finalised. My mind is very open. I would love to stay to finish what I've done and I think there's good intentions there, but we haven't sat down and had that conversation yet," he said.
The ACCC approval comes in the wake of Woolworths' decision to cut the price of Homebrand white bread by 15 per cent to 85¢ a loaf as part of its Cheap Cheap campaign. Coles and Aldi were quick to follow the price cut.
"We have been living with dollar bread for three years plus and the majority of our brands are selling at a significant premium to that," Mr Delaney said.
"Obviously deflation in the opening price point of the category is a challenge. I understand the retailers own the brand and they have the right to price it where they want to price it."
Goodman Fielder's biggest and fastest growing Australian brand, Helga's, has been selling at a weighted average price of $3.80 over the past six months.
"It has been sustaining a premium and premium brands need to do that... We will defend our brands as we need to. There is a place for 85¢ bread [but] it's too early to comment about what the impact is," Mr Delaney said.
Goodman Fielder is also facing pressure from the recent introduction of $1 a loaf house brand bread in New Zealand, where private label penetration is deeper than in Australia.
Goodman Fielder said at the start of September that a shareholder meeting to approve the scheme of arrangement was now expected to be held in the first quarter of calendar 2015 and the scheme end date had been postponed from December 31 to March 31.
The delays sparked rumours that Wilmar and First Pacific are buying time so they can see the impact of cut-price bread on their target's earnings.
The bidders have the right to walk away from the offer if Goodman Fielder's earnings before interest and tax fall $30 million or if the value of net assets falls by $100 million, triggering a material adverse change clause.
As well as pressure from its supermarket customers Goodman Fielder has been struggling against soaring milk prices that halved margins in its dairy business last year. Fonterra's big cut to its milk price last week should stem the pain in the dairy.
Wilmar and First Pacific are now awaiting clearance from the Foreign Investment Review Board and the Ministry of Commerce in China before proceeding with the offer.
The bidders are offering shareholders 67.5¢ a share. Goodman shares closed at 62.5¢ on Tuesday, reflecting uncertainty about the deal closing.
