what next...

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    If the last couple of defence mechanisms are anything to go by the next defensive move by the GMF board will probably be to add rat poison to the bread and get a food scare going....(only joking guys if you are reading this...LOL) See below from todays AFR - Chanticleer Section.

    Goodman stoush gets messy
    Jan 9
    Brett Clegg

    Goodman Fielder yesterday found more than half a billion reasons why Graeme Hart's Burns Philp should have thought twice before launching a $2.5 billion takeover bid without conducting any due diligence.

    Goodman, the producer of brands such as Uncle Tobys, White Wings and Meadow Lea, is a perennial source of bad news for investors.

    Yesterday it belatedly disclosed that it may face additional charges of $102 million in tax, interest and penalties from the Australian Taxation Office - on top of an existing provision of $37 million.

    In a takeover situation, 16 days is an awfully long time. It is appalling that Goodman took that time, having received the notification letter from the ATO on December 24, before it updated the market.

    A footnote in last year's accounts relating to the contingent liability was unspecific and of little value.

    It is of no consequence that Goodman believes it can successfully defend the contested treatment of a 1990 loan refinancing facility, expiring in 2006, or that chairman Keith Barton has received independent legal and taxation advice to this effect.

    The simple fact is that 19.7 million Goodman Fielder shares changed hands over those 16 days and the buyers of the stock would have liked to have known of this potential $140million cash outflow.

    At face value, the tax bill breaches accounting-related conditions in the Burns Philp offer and may, though unlikely, trigger the clause that there be no material adverse event subsequent to the offer.

    The predator could walk away but probably won't. It's in too deep.

    However, Hart and his advisers from Credit Suisse First Boston may have grounds to ask the Australian Securities and Investments Commission for approval to lower the value of its $1.85-a-share cash offer. The tax hit is equivalent to 8¢ a share.

    In a second statement, Goodman delivered what it believes is potentially a big annoyance for Hart. It reckons that because Burns Philp's own financiers will take security over its assets, an early repayment to US lenders of $392 million may have to be made.

    Given Burns Philp is saddling itself with an enormous debt load to finance its offer, an extra $392million in cash going out the door could potentially push the envelope.

    Of course, it may have worked on the assumption it would have to refinance all Goodman's existing debt, in which case it should have planned for this outcome. But the real bad news is that Goodman estimates that the net cost of refinancing is likely to be about $26 million.

    Hart was burnt once when he discovered hidden nasties in Burns Philp and he doesn't want another near-death experience. His share raid on Goodman in December, buying 14.9 per cent for $327million, was bold and now also looks foolhardy.

    None of the above changes the fact that Hart's bid to combine his yeast and spices empire with the producer of retail brands in cereal, bread and snacks doesn't make strategic sense. A clear implication of his Goodman gamble is that Hart failed to find a corporate buyer for his own business.

    He'd been trying to sell his US spices division for most of last year and wanted to shop the rump of yeasts to a larger corporate buyer before his options expiry in August, requiring him to make a significant cash injection. So what did he do? He doubled up his bet.

    Similarly, no single buyer wants all of Goodman. Most, like Nestlé, which is known to have looked at the business mid-last year, want only Uncle Tobys.

    That's why Goodman corporate adviser Macquarie Bank is no doubt trying to cobble together a consortium based around Nestlé. Or even the often-touted ConAgra, which recently filed a notice with the Securities Exchange Commission in the United States to raise up to $US4billion ($6.95 billion) through issuing new equity.
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