Hillsdown sale may net £300m
Tuesday 07 March 1995
The UK company's chairman, Sir John Nott, said the proceeds would be spent on European food processing and distribution assets.
The proposed bid, announced yesterday, is for all of Maple Leaf Foods, Canada's biggest food manufacturer and Hillsdown's main North American subsidiary. The bidders are Wallace McCain, a legendary Canadian food magnate, and the large pension fund of the Ontario Teachers' Federation.
Hillsdown has agreed to sell its 56 per cent share in Maple Leaf to the Canadian group, unless a higher bid materialises. The offer, for cash and shares, would be worth at least C$623m to Hillsdown and perhaps as much as $680m (£300m). The lower figure would be paid if minority shareholders in Maple Leaf opt to take cash rather than shares.
"We've been very happy with Maple Leaf Foods as a company," Sir John said in an interview. "But we've never been able to flow through the cash because we didn't own the company. We did consider several times in recent months the possibility of making a bid for the minority share, but we weren't sure we could get it at an acceptable price."
"Hillsdown has been very frustrated with Maple Leaf," analyst Duncan Fox at SG Warburg said. "They weren't able to reorganise the company as they had intended."
Tim Potter, UK food analyst at Smith New Court, said the deal would have "a slight earnings-enhancing effect" on Hillsdown's balance sheet.
Sir John confirmed that European food assets would be a primary acquisition target. "We don't have anything particular in mind but in due course the funds would be invested in European food businesses." He added the extra cash would mean Hillsdown could afford to spend as much as £500m on acquisitions but cautioned that "we are not going to pay some idiotic price for assets". Small, tactical deals are more likely.
Hillsdown will report its 1994 earnings on Thursday. Analysts expect pre-tax income of about £175m-£180m, following flat earnings in 1993. Hillsdown shares were up 2p to 111p on announcement of the proposed Canadian sale, closing at 110p.
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