Heinz Australia has bid $210 million to buy fruit juice and canned food maker Golden Circle.
The US-owned food group has offered Golden Circle’s largely grower shareholder base $1.65 a share – well above the $1 and $1.05 a share offers, respectively, of Coca-Cola Amatil and Pure & Natural Beverages this time last year when the company was carrying significantly more debt.
Since then, Golden Circle has recapitalised and listed on the NSX, the former Newcastle Stock Exchange. The experience has, however, been less than rewarding until now for most shareholders, with the shares drifting down from around $1 on listing in March, to 40¢ before the offer.
If the proposed deal goes ahead, it will be a major windfall for Anchorage Capital, the private equity group that bought 35% of Golden Circle last year and helped put together its corporate restructuring plan which resulted in a move from a $22.2 million loss to a $3.5 million profit in the year to June 30.
According to Anchorage principal and Golden Circle chairman Phillip Cave, “this was an unsolicited approach from Heinz. It’s an attractive bid and it was incumbent on us to take it to shareholders.”
Anchorage paid $35.5 million for 44.4 million shares at 80¢ each — which means selling out to Heinz will more than double its money. Anchorage’s backer, Macquarie Investment Management, is also likely to share in the benefits. Anchorage’s only other public deal, buying Hans Continental Smallgoods, fell over last week.
Cave said he had not yet heard from any potential rival bidders for Golden Circle. The scheme with Heinz has a $2.1 million “break fee”, which stops the board shopping for a better offer, but not from recommending an unsolicited and superior bid.
Heinz’s managing director in Australia, Peter Widdows, agreed yesterday that buying Golden Circle, for $288 million including debt, was a significant move.
“It’s a big deal for us. They are just over half our size,” he said.
Sales by the combined Heinz Watties business hit $760 million in Australia and New Zealand in the year to April 30, generating a $53 million profit — most of which was returned to its American parent as a dividend.
Globally, Heinz accentuates the “health and wellness” aspect of its products. Golden Circle, no longer just a pineapple and beetroot canner, makes 70% of its $400 million sales from fruit juice and fits neatly into Heinz’s orbit.
It was Golden Circle’s push into juice, buying the Original Juice Co. in 2005, that gave it a Melbourne manufacturing operation in Mill Park, which employs about 200 people.
According to figures earlier this year, Golden Circle’s brands are second largest in the Australian market for chilled and “ambient” (non-refrigerated) juices.
That adds another arm to Heinz here, which gets about 20% of its sales from frozen foods, with soups, canned fish, its renowned beans and baby foods making up the bulk of the rest.