Goodman Fielder finally sells fats and oils business

Transtasman food giant Goodman Fielder is finally selling off its edible fats and oils operation on both sides of the Tasman for $A240 million, but will hold on to its New Zealand flour milling operations.

The business, which processes edible fats and oils and supplies food manufacturers and wholesalers in Australia and New Zealand, has been sold to international food company Cargill.

Goodman Fielder announced plans to sell the business earlier this year and revealed it was negotiating with potential buyers in October.

While the fats and oils businesses was said to be worth between $A250 and $A400 million, the final sale price came in under that, although managing director Peter Margin said it was still a “significant premium to the carrying value of the business”.

The sale includes the commercial business’s four fats and oils refining facilities, although it will retain title to the land at the Brisbane facility, subject to an extended lease back to Cargill.

The company made a point of noting its New Zealand flour milling operations were not part of the sale, while it will also hold on to the part of its food service operations that does not relate to fats and oils.

The sale is a result of the company’s current focus on its consumer brands, according to Mr Margin.

“As a consequence of our strategic decision earlier this year to focus on our consumer brand portfolio, we decided that, as a commercial industrial business, it did not fit comfortably with our major strategic focus, and that therefore the funds employed in this business would be better utilised elsewhere.”

The sale still needs to be approved by competition regulators before being finalised.  

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1 Comment & Question

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Good morning,

I am writing this email in regard to an announcement by Goodman Fielder on the 9/12/09 that they intended to sell their edible fats and oils products business to international conglomerate Cargill's for $240 million.

I am concerned that this sale may create a situation in the market where Cargill's will be able to abuse their market power. “Profitability in Australian commercial oils has narrowed since Cargill began selling in the market, boosting competition and making it harder for Goodman Fielder to recover higher costs. Goodman Fielder’s profit margin for the unit, which measures earnings as a proportion of revenue, fell to 9.7 percent in the year ended June from 13.9 percent a year earlier.” http://www.bloomberg.com/apps/news?pid=20601080&sid=aSeIFcAmxrXI. Was Cargill's dumping product into the Australian market with the end view that they could end up buying Goodman Fielders business for a low amount? I would think yes, reason? If you look at the sale process there was little or no interest in the Goodman Fielder business from outside companies because they knew that Cargill was serious about controlling the edible fats and oil market in Australia and New Zealand.

I don’t think you need to be Einstein to work out that buying your major competitor will result in less competition and increased prices for consumers.

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