Buyout of Australian Biscuitmaker Draws Fire

THE eagle finally got the parrot.

At least that is the way it was played here Feb. 5 as Campbell Soup Company finally won its takeover bid for Arnotts Biscuits Ltd., one of the oldest companies in Australia.

Campbell has been trying to take over the beloved Australian company with the Rosella parrot on its logo since October and the little bird has been squawking mightily. But the American food giant in the end boosted its 33 percent share to 58 percent.

Two issues predominated. One was pure wallet: Arnotts said Campbell's offer of $1.2 billion (Australian; US$800 million), or $8.80 per share, was too low for a healthy company that had posted a record $53.3 million profit for the December half year. Campbell raised its per-share offer to $9.50 in January. Many saw it as still too low. One independent report valued the biscuitmaker at between $10.78 and $11.32 a share.

What burned people more was the thought that Australia was in danger of losing yet another of its few corporate icons. Already Quantas airlines, Speedo swimwear, Dryza-Bone rain gear, and Vegemite, an odoriferous yeast spread unaccountably loved by many, have all been bought by foreign companies. Arnotts officials have said that surrendering would be like selling Ayers Rock.

Both sides resorted to full-page ads exhorting shareholders to sell or not to sell. The Arnotts family, which still holds 25 percent of the shares, put up the biggest fight by forming a shareholders group called Stay Australia Owned, the same initials as the SAO cracker that launched the 125-year-old company.

With national pressure being put on institutional and private shareholders not to sell, Campbell wasn't able to gain the 50 percent it wanted by the time the bid offer was due to close Jan. 29. So it extended it another week. In that time AMP Society, an insurance company that had initially refused to sell, crumbled and sold most of its 8.5 percent stake.

What's gotten lost in the heat of the battle is that Campbell was invited in by Arnotts in 1985 to save it from a takeover by Australian entrepreneur Alan Bond. The federal government could have blocked the 33 percent investment through its Foreign Investment Review board, but gave the green light.

The reason for the wrestled-to-the-ground takeover? The burgeoning processed-foods market in Asia has many multinational corporations salivating. Australia is seen as a logical jumping-off point into Asia. Imports of processed foods into Asia have been growing at more than 20 percent a year and Australia is getting about half of this growth.

Campbell said Arnotts didn't push hard enough into Asian markets; Arnotts denies that.

"The problem has been tariff barriers," says Tony Sullivan, one of Arnotts' directors. "In the majority of Asian countries it's been extremely high. It's only now that they are starting to relax." Arnotts exports about 1,000 tons of biscuits a year to Japan and Southeast Asia, aiming for 10,000 tons in five years.

Campbell's influence over Arnotts could be clouded by an unusual agreement signed in 1985 limiting Campbell's voting power to 14.9 percent unless it held 85 percent of the shares. But having a 58-percent share will enable Campbell to increase its presence on the board by one member to 3 out of 10.

Pat Hinton, spokesman for Campbell, says the objective now is to get on with making biscuits. "Campbell, because of its international biscuit experience, can help Arnotts in dealing with international markets. Campbell already has throughout Asia an infrastructure through its soup operations."

But will teatime "bikkies" attract buyers in a country where the staples are fish and rice?

"Part of the challenge will be to develop new lines of cookies," Mr. Hinton says with gusto. "The potential rewards for getting it right are just huge. Rice-eating countries may not like crunchy cookies. What sort of taste, colors, packaging, and naming will appeal?"