San Miguel Corp. has made a bid for Australia's largest publicly-listed dairy company. The food and beverage giant made an A$1.78bn (US$1.37bn) offer for National Foods Ltd late last week.

The bid, equivalent to A$6.00 a share for the Australian company, beats the A$5.45 offer tabled by New Zealand dairy giant Fonterra Cooperative Group Ltd.

In a disclosure to the Australian Stock Exchange last week, the board of National Foods unanimously backed San Miguel's offer and recommended that stockholders accept the offer in the absence of a superior proposal. National Foods has rejected the unsolicited offer from Fonterra.

In a statement, San Miguel chair and chief executive officer Eduardo Cojuangco Jr. said that National Foods, as one of Australia's leading consumer product companies, was an attractive acquisition for San Miguel.

"The proposal reflects San Miguel's long-term strategic ambition of leveraging its core competencies to expand its presence in non-alcoholic beverages and food in selected countries in the Asia Pacific region," said Cojuangco.

"National Foods is a good strategic fit for San Miguel, and their management is strongly committed to growing the business. We recognise National Foods' strong growth prospects and believe closer links with our existing Australian and Asian operations will create opportunities for both companies," Cojuangco said.

"San Miguel welcomes the unanimous support of the Board of National Foods for our proposal," he added.

National Food chair David Crawford said: "San Miguel's offer represents a premium of 28.5% to the closing share price prior to the Fonterra bid. The proposal is superior to Fonterra's offer which your board continues to consider grossly undervalues National Foods.

"The offer of A$6.00 per share is within 2% of the board's valuation range of A$6.11 to $6.65 per share, excluding the value of the franking credits accompanying the interim dividend," Crawford added.

San Miguel's offer price will be adjusted depending on the amount of the interim dividend and any other distributions paid to National Foods shareholders.

The offer was subject to it winning more than 50% of National Foods, which is about 19% owned by Fonterra.
The A$6.00 per share bid price included a A$0.10 a share dividend, which National Foods intends to pay in January.
National Foods said it has entered into a "deed of undertaking" with San Miguel governing certain aspects of the expected deal.

San Miguel is reportedly planning to fund the acquisition from new debt facilities and existing cash in hand. The company has received underwritten commitments for debt facilities from ABN AMRO Bank N.V., Barclays Capital - the investment banking division of Barclays Bank PLC, The Hong Kong and Shanghai Banking Corp. Ltd., Standard Chartered Bank and Sumitomo Mitsui Banking Corp.

San Miguel intends to make available the full terms of its offer within the next four weeks. The offer will be made by the company or a wholly-owned subsidiary.

National Foods is Australia's biggest milk processor. Its products include milk, yoghurt, gourmet cheese and cream.