Another Australian company up for sale?

Overseas buyers active in Australia's 'soft commodities' market

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published August 28, 2012 1:35 pm AEST

The largest Australian owned grocery supplier may be heading overseas after selling off one of its divisions today.

Goodman Fielder Ltd (ASX: GFF) may just have put itself up for sale today, after the company announced that it had sold its fats and oils business, Integro to GrainCorp Limited (ASX: GNC). Goodman Fielder will receive $170 million, and make a $25 million profit before tax. The proceeds will be used to pay down debt and strengthen the company's balance sheet.

Goodman Fielder has said that Integro was a non-core business, and the company wanted to focus on retail branded products. As part of the sale, the two companies have formed a partnership, with Goodman Fielder supplying GrainCorp with raw materials, while Graincorp will supply Goodman Fielder with oils and finished products.

Back in July, Deutsche Bank suggested Goodman Fielder could be a takeover target, once it sells its Integro division. Singapore company, Wilmar International, which owns 10.1% of Goodman Fielder, may make a bid for the rest of the company. Just two weeks ago, Wilmar told analysts in Singapore that a proposal had been put to Goodman Fielder, but the price offered was lower than Goodman Fielder's board wanted, according to a report in The Australian. Goodman Fielder has denied that any proposal was received.

The report also suggests that some of Goodman's largest shareholders contacted Wilmar directly, and were also told that a proposal was put to Goodman's board. Those same shareholders are likely to push for the two companies to re-enter discussions now.

Overseas buyers are becoming more active in the Australian 'soft commodities' markets with recent purchases by Chines buyers of Australian sugar interests, and Canada's Viterra making a bid for GrainCorp.

Recent comments from the Federal government's Department of Agriculture, Fisheries and Forestry Deputy Secretary Phillip Glyde provide a glimpse of what may be motivating purchasers. Glyde said "Global population growth and rising incomes, particularly in middle income developing countries, are expected to lead to increased global food demand in the longer term".

Other potential targets could include stock feed supplier Ridley Corporation (ASX: RIC), diversified conglomerate RuralCo Holdings (ASX: RHL) and rural services company, Elders Ltd (ASX: ELD).

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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